What's Happening?
Snap has announced a $400 million partnership with Perplexity AI to integrate the startup's answer-engine into Snapchat's chat experience. This integration, set to roll out in early 2026, will allow users to ask questions and receive conversational, cited
answers directly within the app. The deal, a mix of cash and equity, is expected to begin contributing to Snap's revenue in 2026. Following the announcement, Snap's shares saw a significant increase in pre-market trading. The company also reported better-than-expected Q3 results, with a 10% increase in revenue and a narrowed net loss.
Why It's Important?
This partnership represents a strategic move by Snap to diversify its revenue streams beyond advertising. By embedding Perplexity's AI capabilities, Snap aims to enhance user engagement and retention, particularly among its core Gen Z audience. The integration could also position Snap competitively against larger platforms that are incorporating AI-driven features. Additionally, the deal underscores the growing importance of AI in enhancing user experience and driving business growth in the tech industry.
What's Next?
Snap plans to roll out the Perplexity integration globally in early 2026, with revenue recognition starting the same year. The company will focus on differentiating this new feature from its existing 'My AI' service. Analysts and investors will be watching how Snap manages the integration and its impact on user engagement and revenue. The company's Q4 revenue guidance and ongoing share repurchase program will also be key areas of interest.
