How Snap Made Direct Response Ads a Big Business

In the run-up to Snap’s second quarter earnings due Aug. 7, several Wall Street analysts have lowered their estimates for what the company has already warned will be a weak quarter. The after-effects of Snap’s troubled app redesign earlier this year hurt user growth, which is expected to be weak in the three months ended June 30.

But there is one bright spot in Snap’s business that executives will be able to talk about: the rapid growth of the company’s direct response ads business. Unlike ads, which aim to get people to remember a company’s brand—like most TV commercials—direct response ads prompt people to take an action, like downloading an app, booking a trip or entering an email address. Since Snap rolled out direct response ads in early 2016, they’ve grown to account for around 40% of overall revenue, according to a person with knowledge of the number.