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Here’s how Snapchat plans to become a billion dollar company

Hint: It has to do with a new API.

Snap CEO Evan Spiegel onstage
Snapchat CEO Evan Spiegel
Recode / Asa Mathat

Snapchat told investors earlier this year that it could be a billion dollar company in 2017. Now it’s talking about the tool that could help get them there.

Snapchat made a bunch of advertising announcements Monday via a feature story in AdWeek. The two most important elements of the company’s strategy, outlined below, paint a clear picture for how Snapchat plans to grow.

  • Snapchat is launching an ads API, which means third party ad tech startups will soon be able to sell Snapchat's ad inventory using software and bidding algorithms. It’s the same strategy Facebook, Twitter and Instagram implement, and one that Snapchat has been thinking about since the beginning of the year.
  • Snapchat will soon show ads between users’ Live Stories, which means that as you scroll through your friends’ photos and videos, you may also see a word or two from one of Snapchat’s advertising partners. This is the closest Snapchat has gotten to Facebook or Twitter’s feed-style advertising product, and the move means Snapchat will soon have a lot more ad space to fill.

This combo — more ads and an easier way to sell them — should mean more business for Snapchat. Plus, it won't need a human ad-sales team to fill every vacant opening (which is how its business currently works).

The obvious hurdle here is that Snapchat CEO Evan Spiegel has been openly critical of super-personal targeted ads, specifically the retargeting ads that show you items based on other things you’ve looked at on the web. Spiegel thinks these ads are "creepy" and has vowed not to use them. He thinks building out profiles on users is a violation of user privacy.

But those super personal target ads are an important part of the digital ad business, especially at places like Facebook and Google. They typically go hand in hand with the kind of ad tech Snapchat is looking to roll out.

So we don't know how Spiegel and Snapchat will strike that balance. But we do know Snapchat’s new business plan and why it’s been pitching itself as a billion-dollar company. Time to find out if the plan’s going to work.


Snapchat explained in 90 seconds

This article originally appeared on Recode.net.

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