Nov 5 (Reuters) - Snap beat third-quarter

revenue estimates on Wednesday and said it has partnered with

Perplexity AI to integrate its artificial intelligence-powered

search engine into Snapchat.

AI startup Perplexity will pay Snap $400 million over one

year in cash and equity, with revenue contributions expected

from 2026.

The deal positions Snap to better compete with larger rivals

such as TikTok and Meta-owned Facebook and Instagram,

which currently are the preferred destinations for advertisers

thanks to their larger user base.

The integration of Perplexity AI will offer verifiable

answers to questions within the Snapchat app, aiming to draw

more users on the social media platform and boost customer

retention.

Snapchat's parent has been leaning on direct-response ads,

designed to prompt specific actions such as app downloads or

website visits, to bolster digital advertising, even as

brand-awareness campaigns show some signs of weakness.

Direct response ad revenue surged 8% during the third

quarter, driven by strong demand for "Pixel Purchase" and "App

Purchase" ad optimizations that enable businesses to target

users most likely to complete a purchase on their website or

within their app.

The company's third-quarter revenue rose 10% to $1.51

billion, beating analysts' average estimate of $1.49 billion,

according to data compiled by LSEG.

Its net loss narrowed to $104 million from $153 million a

year ago.

Daily active users (DAU) of Snapchat increased 8% to 477

million globally, compared with the estimate of 476.3 million.

The company forecast fourth-quarter revenue of $1.68 billion

to $1.71 billion, while analysts expect $1.69 billion.

Snap warned that overall DAUs may decline in the fourth

quarter, citing changing investment priorities and anticipated

impacts from age verification and evolving regulatory

landscapes.

Australia's Social Media Minimum Age bill, set to take

effect in December, is among the evolving regulations that Snap

expects would impact user engagement.