TV Shows, in a Snap!

Fresh from its very successful IPO, Snap is ramping up its focus on television programming -- much like rival Facebook.

According to a story on Digiday UK, Snap will be focusing more on original programming for Snapchat Discover, the entertainment component of its app.

Discover has been used mostly for content published by a range of publishers such as ESPN, Cosmopolitan and BuzzFeed. But with TV programming becoming increasingly important to the company's strategy, it wants to focus on original TV shows made for Snapchat Discover.

The precise look and feel of the Discover platform is yet to be determined, but it will be centered around TV shows. The goal is to drive viewership and advertising revenue -- the key to the growth story that Snap has sold to investors.

Snap has been busy accumulating content from various TV programmers, including E!, the BBC, NBC, ABC, Turner and A+E Networks. While many are unsure of the user interface and positioning, they ultimately believe Snap can deliver audiences and positive user-experiences.

Still, this is an important concern, with Discover seen as an extremely unstable platform. For example, Discover's redesign using a tile-based format resulted in huge spikes (and falls) in daily viewership for some publishers, and the company's decision to drop Discover below its user stories in the app UI resulted in viewership declines of more than a third for others on the platform. However, some do report that viewership has drifted back up since then.

Snap's success and ability to keep these partners is built on its perception as the platform of the next-generation, i.e., if your brand wants to reach younger millennials, Snap is your best destination. But competition from Facebook is getting more intense, and both social networks are targeting a video services market that already has sizable incumbents in the form of pay-TV providers, broadcasters with their own OTT services, and leading OTT providers such as Netflix, Amazon, HBO, YouTube, Hulu, etc.

The key to Snap's success (perhaps even survival) is to maintain that perception. And so far the company appears to be doing so. Its stock rose 45% when it opened for trading on the occasion of its public offering earlier this month. With 200 million shares, it raised $3.4 billion and was valued at nearly $32 billion the day after its IPO. While this has raised some fears of a bubble, as my colleague Iain Morris points out in his post on Light Reading, the company has also grown its user base to more than 150 million with site traffic at 2.5 billion daily messages exchanged. (See Snap, Crackle & Pop: $28B IPO Stokes 'Bubble' Fears.)

Certainly the company appears to believe in its own prospects. Last year, it decided to switch from an ad-sharing revenue model with its publisher partners to a flat licensing fee model. Snap prefers to now pay its publishers to license their content, and retains all advertising revenue generated (reportedly amounting to $58 million last year).

This approach also allows it to sell advertising packages across multiple publishers. Given that the company is heavily oriented towards mobile usage, this also feeds into a broader growth story for mobile and online video advertising, both seen as major growth sectors by the Interactive Advertising Bureau (IAB.)

While it appears larger players are unwilling to switch from an ad-revenue sharing model to this kind of flat licensing structure, many smaller players are happy to get a guaranteed annual payment without bearing the risks of an unpredictable advertising market.

All of this seems to be working for Snap. It continues to attract investment, drive user growth and engagement, and has doubled its list of publishing partners.

But its stock price has fallen from a high of $27.09 on March 3 to $21.09 on March 13, and it still remains to be seen if Snap can repeat its success with messaging and user-generated live streaming in the area of professionally produced TV shows.

The answer will likely be finding the right genres and formats for the Snap audience, and the way that they use the app -- it's not going to be 60-minute dramas of the kind found on pay-TV and Netflix.

— Aditya Kishore, Practice Leader, Video Transformation, Telco Transformation