Snap Is Now Selling Ads Inside Its AI Chat to Make Money

Snap Inc. has started running ads directly within the AI chatbot in its Snapchat app. These ads appear when you're having a conversation with the company's AI assistant, My AI. The new format is designed to make money from the AI experience without disrupting the chat itself.

According to Snap's data, these AI ads perform better than many traditional ad formats. They generate 22% more sales for brands and cost about 20% less per customer action. When compared to full-screen ads, they deliver twice as many sales for the same number of ad views.

This move is part of Snap's larger plan to turn its AI investments into revenue. The company has partnered with Microsoft and made a major deal with Perplexity, an AI search engine, to bring more capabilities to Snapchat.

How Microsoft's Ads Fit Into the Chat

Snap worked with Microsoft to put search-related ads into My AI conversations. These ads show up when they're relevant to what you're talking about with the chatbot. Microsoft's advertising clients can now place these ads in Snapchat, starting in the U.S. and expanding to other countries.

My AI has been available to all Snapchat users since April 2023. The numbers around how much people use it suggest there's real commercial opportunity here. Over 150 million people have sent 10 billion messages to the chatbot. About one in five Snapchat users talk to My AI on a regular basis.

Snap says it uses what people talk about with the AI to improve how it targets ads. The company calls this "privacy-safe intent data." Essentially, the patterns in your conversations help Snap show you ads that might be relevant to what you're interested in.

Real Examples: How Brands Are Using This

Credit monitoring company Experian is one of the first brands to try Snap's AI ads. They use it to talk to people about credit reports and money management topics, aiming to reach people who might be interested in those services.

The performance numbers Snap shares suggest that ads inside conversations work better than traditional ads shown alongside content. There are a few reasons this could be true. When an ad appears during a relevant conversation, it feels more natural and less like an interruption. It's similar to how search ads work online—when you're looking for something, an ad related to what you're searching for is useful rather than annoying.

The Perplexity Deal: Building a Search Engine Inside Snapchat

Snap announced a $400 million partnership with Perplexity, a company that built an AI tool that answers questions. This integration lets Snapchat users ask questions and get answers directly in the chat, with sources listed.

Why does this matter for Snap. Search queries are valuable for advertising. When someone searches for something online, they're actively looking for information or products, which makes them likely to be interested in relevant ads. By bringing search into Snapchat, Snap gains access to that valuable user intent data. Young people already use Snapchat constantly, so this could change how they find information.

Putting Multiple AI Tools Together

Snap isn't relying on just one AI company. The platform also uses Google's AI tools alongside the Microsoft and Perplexity partnerships. This approach suggests Snap is choosing different tools based on what works best for each job, rather than sticking with a single provider.

CEO Evan Spiegel has said the company is investing heavily in AI and machine learning. Unlike some competitors who focus on AI tools for creating content, Snap is betting on chat-based AI as the main way people interact with the technology.

Supporting 10 billion messages from 150 million users requires significant computing power and costs real money. For Snap's approach to make sense financially, the company needs to turn these conversations into advertising revenue.

What This Means for Snap's Business

The broader context here: Snap's younger user base has always been harder to make money from than the older audiences that Facebook and other platforms attract. Ads that fit naturally into conversations could change that math. If people accept ads in their chats with AI, and those ads actually help people find what they want, Snap finds a way to earn more money from each user.

The tech industry is moving toward AI-powered advertising in general. As more people get used to chatting with AI assistants, companies want to advertise in those conversations. Snap is moving quickly to build this out.

In my view, the early results are worth paying attention to. If conversational ads genuinely outperform older ad formats, as Snap's numbers suggest, that could reshape how digital advertising works across the industry. The test case here is whether people will accept advertising in something as intimate as a chat conversation—and whether that advertising actually feels helpful rather than intrusive. Snap's early numbers suggest the answer might be yes, but sustained success will depend on keeping the experience feeling natural as more brands jump in.