According to CNBC, Snap’s stock surged 13% after the company announced a strategic partnership with Perplexity AI to integrate their AI-powered search engine directly into Snapchat. The deal involves Perplexity paying Snap $400 million over one year through a combination of cash and equity. Snap also reported strong third-quarter results with revenue of $1.51 billion, beating estimates of $1.49 billion. Daily active users grew 8% year-over-year to 477 million, exceeding projections. The company expects to start seeing revenue from the Perplexity deal in 2026. Deutsche Bank analyst Benjamin Black noted this represents a meaningful step toward building alternative revenue streams as large US advertisers pull back from the platform.
Snap’s Advertising Problem
Here’s the thing about Snap’s situation: they’re facing the same headwinds that have been hitting social media platforms lately. Big advertisers are getting more cautious with their spending, and platforms that rely heavily on brand advertising are feeling the pinch. So when Deutsche Bank’s analyst calls this a “meaningful step toward building out alternative revenue streams,” he’s basically saying Snap needs to diversify away from traditional ads. And at $400 million over one year, this isn’t just some experimental side project—it’s a serious revenue stream that could help stabilize their business model.
The Perplexity Play
Now, what’s really interesting here is the timing and structure of this deal. Perplexity is paying Snap upfront—$400 million in cash and equity—but Snap won’t recognize that revenue until 2026. That tells you this is more about strategic positioning than immediate financial relief. Perplexity gets access to Snapchat’s massive user base of 477 million daily active users, many of them younger demographics who are comfortable with AI interfaces. And Snap gets to position itself as an AI-forward platform while getting paid handsomely for the privilege. But here’s the question: will users actually want AI search in their social app? Or is this just another feature that’ll get buried in the interface?
The Bigger Picture
Look, this isn’t just about one partnership. We’re seeing a broader trend where social platforms are desperately seeking new revenue models beyond traditional advertising. The 13% stock jump suggests investors see real value in this approach. And honestly, they should—diversifying revenue streams is smart business, especially when your core advertising business faces uncertainty. The user growth to 477 million daily actives shows Snap still has engagement, which gives them leverage to strike these kinds of deals. But the real test will come when we see whether users actually engage with Perplexity’s AI search or if this becomes just another forgotten feature in an increasingly crowded app.
