Amazon.com Inc (NASDAQ:AMZN) announced a partnership with Snap Inc (NYSE:SNAP) on Monday to allow users to make purchases directly from ads deployed within the Snapchat app. Analysts at Jefferies believe the marriage solves two of the social media company’s biggest problems.
“Over the last two years SNAP's biggest issues have been growing ad demand and driving better advertiser ROI,” the analysts wrote in anote to clients.
“It's difficult to quantify the initial revenue impact, but we would expect the partnership to drive higher conversion rates, and in turn, higher ad pricing and revenue in 2024,” they added.
Snap shares rose 7.5% Tuesday to $12.15 following the announcement, and Jefferies rose its price target to $12 from $11 while maintaining a Hold rating.
Looking ahead, the firm also said it expects Snap to add additional advertising partnerships.
“The trend of digital ad platforms welcoming third-party demand is nothing new, with Amazon announcing partnerships in the last six months with Pinterest Inc (NYSE:PINS) and Meta Platforms Inc (NASDAQ:FB),” the analysts noted. “...Given SNAP's challenges scaling ad demand directly, we expect them to onboard additional retail media networks as well.”
However, the analysts did argue that Amazon’s deal with Pinterest “likely has better potential” since its users are already searching for products and ideas, which lends itself to ecommerce.
Snap shares added another 0.8% Wednesday to $12.25.
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
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