Snapchat Moves from Ad Revenue Sharing to Licensing Fees
What: Snapchat is changing it' ad sales revenue model with media agencies.
Why it matters: Snapchat wants to pay content partners a flat license fee up front and keep the ad money for itself, instead of sharing ad revenue.
The messaging app Snapchat, now known as Snap, is planning to make some adjustments to the way it works with media companies by changing its revenue model.
Since its launch in 2015, publishers were able to sell ads in their own channels and then split revenues with the app.Whereas, Snapchat sold ads against the same content using its own sales team. Now, splits have varied depending on the deal and who sell the ads, Re-code has reported.
Snapchat wants to pay content partners a flat license fee up front and keep the ad money for itself, instead of sharing ad revenue. This resembles TV networks model to buy programming.
Snapchat Discover is only open to around 20 publishers, including BuzzFeed, Cosmopolitan, The Wall Street Journal, Food Network, and the NFL. Around 100 million of Snapchat users visit the Discover section every month, with the top-performing channels averaging view time of between 4 to 6 minutes.
Sources told Business Insider that those top-performing channels average around 10 million monthly users a month — far fewer than the amount of visitors they get to their sites — so an upfront payment may be seen as preferential to a risky advertising revenue share that requires time investment for their sales teams.
Media outlets have been selling “packages” to marketers that include Snapchat inventory, as well as ads on their other platforms like television or their websites, according to Business Insider. But now that terms have changed, it is uncertain whether media outlets would continue offering such deals or adjust to Snapchat's new sales model while they accept money from it.
The move of the company may seemed to be aimed at having full control over its ad inventory to be ready for a public offering that could value the firm at US$25 billion or more.
Other digital platforms like Facebook and Apple, have offered similar programs to publishers that provide them content.