Evan Spiegel, co-founder and chief executive of Snap (SNAP.US), Snapchat's parent company, says he is investing more to bring artificial intelligence and machine learning to Snapchat to make users more interested. This is the company's next major shift after years of overhauling its advertising business.

Spiegel representsCrushcandycrush"everyone realizes thatCrushcandycrushWe have lagged behind in machine learning, which is to some extent reflected in business performance. " "We need to improve in this area and bring together some of the most experienced machine learning personnel to discuss how we can reach the most advanced level and really invest."

Snap has been grappling with dramatic changes in the way people use social media apps and the needs of advertisers. In the past few years, Snap has reformed its advertising business.

Now, the company is investing money in machine learning, artificial intelligence and augmented reality (AR) functions that benefit Snap's advertising business and user subscriptions. Instead of relying entirely on in-house development like Alphabet or Meta Platforms, Snap works in the cloud with large technology partners such as Amazon and Alphabet's Google and is committed to product innovation.

However, Snap expects that in infrastructure alone, it will continue to invest about 84 cents per user per day each quarter. According to Bloomberg's calculations, this is equivalent to about $1.5 billion a year, which is expected to be slightly more than half of annual operating expenses.

Direct advertising

Snap has expanded from focusing on brand advertising to direct response advertising (DR), which enables people to buy or download apps more quickly-which is more technically challenging but more profitable.

Reform comes at a price. Snap's share price has fallen more than 70 per cent from its peak during the outbreak, but the company has achieved the improvements promised by Spiegel. Snap's new advertising products are becoming popular after a decline in revenue in the first two quarters of 2023. Snap has returned to double-digit growth, and analysts expect revenue to reach an all-time high this year. After last month's positive quarterly results, the stock is up more than 71% from a year ago.

"years of hard work at Emarketer is beginning to pay off for its advertising business," a senior analyst at Snap said after the latest earnings release. "as a platform that can provide services, Snap seems to be building some credibility."

Reform again

As advertising revenue grows again, Snap plans to expand its content products and augmented reality experiences and drive new product experiences.

Snap hopes to improve the recommendation algorithm for its Stories and short video application Spotlight. Snap's next big move is to integrate the two products. "I think it will help people find our content on our services, so this is an important priority," Spiegel said.

Spiegel believes that augmented reality is promising because it can be "integrated with the world and shared". "A lot of the things we focus on are things that can't be achieved by current technology. So, whether it's virtual reality (VR) headsets, computers or mobile phones, I think people will really be isolated by the technology they use today. We look forward to a future where people will play, study and work together in the same physical shared environment, but this is achieved through augmented reality. "