Snap (NYSE: SNAP) is the parent company of social media platform Snapchat, which is popular among younger users, especially those 18 to 24 years of age. Brands normally like building relationships with these users through advertising, but Snap has struggled to capitalize on this opportunity over the last few years.

Snap stock set a record high of around $83 in 2021, but it crashed after Apple introduced a series of new privacy rules that year, which made it harder for app developers to track the activity of their users. As a result, Snap could no longer sell highly targeted ads to businesses, and it has grappled with that challenge ever since.

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But Snap hasn't stopped innovating, and its advertising platform is becoming more effective over time. The company delivered solid revenue and adjusted earnings growth last year, so could its stock stage a recovery during 2026?

Businesses typically spend most of their advertising dollars on platforms that deliver the best conversions, so Snap is always looking for new ways to connect brands with their target audience. Last year, the company launched Sponsored Snaps, which enable businesses to reach users in their message inbox. This area of the app usually has very high engagement, because it's where users communicate with their friends.

During the fourth quarter of 2025 (ended Dec. 31), Sponsored Snaps saw click-through rates grow by 7%, and click-through purchases grow by 17% compared to the third quarter, just three months earlier, thanks to a series of format and ranking upgrades. At an individual customer level, Snap said global travel company Contiki achieved a 283% increase in its return on advertising spend by using Sponsored Snaps to drive bookings, so this has become an extremely effective tool.

Snap also launched a suite of tools last year called Smart Campaign Solutions, which uses artificial intelligence (AI) to help businesses with everything from budgeting to audience targeting. It even includes a new tool called Smart Ads, which can autonomously craft an effective ad by identifying the highest-performing content combinations.

But beyond advertising, Snap is also working hard to diversify its revenue streams through subscription products like Snapchat+ and Memories Storage Plans. Snapchat+ gives users early access to new features, and it also allows them to customize their in-app experiences -- all for just $3.99 per month. These subscription services had a combined 24 million members at the end of 2025, which was a whopping 71% increase from the year-ago period.