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- Chat, Ads, And Cash Will Be The Three-Step Test for This Comeback Social App
Chat, Ads, And Cash Will Be The Three-Step Test for This Comeback Social App
Noah Zelvis
November 08, 2025
In partnership with
You don’t need to predict the whole social cycle. Watch three things that actually move the meter.
Are people still opening the app, are ads getting more effective, and is real cash showing up after the headline pops?
If those arrows point north, the stock usually follows… eventually.
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What Just Happened
Snap Inc. (NYSE: SNAP) put up a clean revenue beat, announced a $500M buyback, and teased a new lane with a $400M Perplexity AI partnership (contributing from 2026).
Guidance nudged ahead of expectations, daily users ticked up, and the market remembered there’s a real business under the memes.
It’s not victory laps time, but it’s a sturdier footing than the tape implied a month ago.
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The Business
Snap runs the internet’s most persistent group chat for under-30s.
It’s private, creative, and fast. Advertisers pay to meet that attention where it lives, and Snap’s rebuilt ad stack is trying to convert the feels into conversions.
Layer on Snapchat+ subscriptions and an on-ramp for third-party AI inside chat, and you’ve got multiple ways to make money that aren’t all hostage to brand budgets every quarter.
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The Three-Step Test
1) Users (DAU & Stickiness)
If people keep opening the app daily, even as age-verification rules tighten, that’s your base. Flat-to-up DAUs under stricter policies says the product is habit, not a fad.
2) Ad Engine (ARPU & Surfaces)
Smarter bidding and inbox placements (Sponsored Snaps) should lift conversion without pummeling the experience.
If ARPU holds or inches up while new formats roll out, the flywheel’s working.
3) Cash (Buybacks & Runway)
Accounting profits talk, but cash shouts. A funded buyback, solid liquidity, and improving EBITDA give Snap time to execute and cushion the bumps.
If free cash flow trends up with revenue, you’ve got self-help, not just hope.
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Why Bulls Still Cheer
Audience that’s hard to buy elsewhere. Under-30 reach with real engagement, not just passive scrolling.
Multiple gears. Ads first, but Snapchat+ and AI distribution add second and third gears over time.
Proof beats promises. A revenue beat + buyback = management is willing to put money where the plan is.
Why Bears Keep Their Helmets On
Policy drag. New age-gating and regional rules can nick DAUs/time-spent and muddle near-term comps.
Ad budget mood swings. Big brands can go cold without notice, especially in North America.
Crowded arena. TikTok, Instagram, YouTube—same dollars, more suitors.
What to Watch
DAU under new rules: Flat-to-up is a quiet win.
ARPU trend: Are inbox and smarter bidding lifting conversion?
Snapchat+ march: ARR progression and feature adds = diversification.
AI milestones: Early engagement signals as Perplexity’s chat integration approaches.
North America brand thaw: Any sign that large advertisers are re-accelerating.
How I’d Think About Position Size
Starter (1–2%) on calm/red days. You’re buying progress with a cushion, not perfection.
Earn the add (toward 3–4%) only if two quarters show stable DAU under policy shifts and ARPU holding/up, with cash/EBITDA trending the right way.
Brake lights: Trim if DAU and ARPU slip together or guidance backpedals while policy headwinds intensify.
What Could Go Right
Inbox ads work. Sponsored Snaps and improved bidding lift conversion without engagement penalty.
Subscriptions scale. Snapchat+ grows into a meaningful cushion against ad cycles.
AI becomes a habit. Keeping answers inside chat adds time-spent and future monetization options.
What Could Go Wrong
Engagement dips on compliance. New verification trims usage in core regions.
Brand budgets stay tight. NA weakness lingers longer than hoped.
Feature fatigue. New surfaces cannibalize rather than grow the pie.
Valuation, Without the Headache
This isn’t priced like a flawless mega-cap.
You’re paying a reasonable tag for a platform with a growing user base, improving ad plumbing, a funded buyback, and real optionality from subscriptions and AI distribution.
You don’t need hero numbers—you need steady users, slightly better ads, and consistent cash.
The Bottom Line
If you want a measured buy-the-dip with rules, Snap fits. Run the three-step test: Users, Ads, Cash.
If those keep trending up through policy noise, the chart usually figures it out later. Not a cocktail-party brag, but it could help pay for the cocktails.
Action Recap
✅ Starter: 1–2% on pullbacks
✅ Add on proof: Two clean quarters (DAU steady under new rules + ARPU stable/up + cash improving)
⚠️ Trim on trouble: DAU and ARPU slipping together or guidance turning south
👀 Watch next: DAU trend, ARPU, Snapchat+ progress, early AI-in-chat signals, NA brand spend thaw
That's our coverage for today; thanks for reading! Reply to this email with feedback or any tech stocks you want me to check out.
Best Regards,
—Noah Zelvis
Tech Stock Insider