Sharing means decreasing your own share – understood Snapchat founders and decided to pay publishers and media brands licensing fees for content creation, instead of sharing ad revenue. This, however, holds sway over all stakeholders and some of them would presumably suffer losses. Who?

 

Shift in Snapchat business model

Over much of its existing, Snapchat attracted various media companies by providing them a great marketing tool, Discover channel. However it is not anybody’s game and Snapchat used to call the shots and to create an exclusive set of creators. To illustrate the exclusiveness, one media company which tried to join the Discover platform was asked to bring in $50 million in ad revenue in the second year as part of any deal.

But being “the most inflexible of the social platforms” falls outside Snapchat plans. The company decided to borrow a TV approach and stop sharing ad revenue with Discover partners, alternatively Snapchat will pay licensing fees and keep the total sum of ad money. With regard to financial aspect, Snapchat plans to receive approximately 1 billion dollars in 2017 from the ad revenue exactly and the future forecasts are solely optimistic.

 

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We have already written that Snapchat is chasing for TV-like content and shows, and new business model does not downplay the importance of content, conversely it is trying to help. By attracting more funds and higher premiums on ads, Snapchat plans to pay for original content. Its founders have already negotiated with NBCUniversal and Viacom to make shows, the budget of which ranges from $40,000 to $70,000 per episode. Do you think Snapchat had the same opportunity while sharing with media companies?

 

The impact on publishers and media brands

Snapchat’s new terms certainly influence both large media companies and individual publishers, however in what way? To make it clear, we have to decide if limited income is beneficial or not: on the one hand you have a guaranteed money source, on the other – you’d hardly tumble over yourself. In this respect, large media brands which primarily orientate on target audience will hardly feel the difference, while smaller content creators are more dependent on social platforms and more subjected to licensing changes.

Therefore, individual publishers have little choice but to adapt. “To the extent publishers still want to be on Discover, they still need an edit team to create content for it,” – claimed Jason Stein, founder and CEO of social content agency Laundry Service. Another option includes appealing to other platforms: Facebook, for instance, already pays approximately $50 million to 140 media companies and creators, which include Vox Media, The New York Times and CNN.  The payments, however, differ, depending on a publisher, but Facebook anyway tries to encourage those, who are in charge for content creation.. By the way, the highest-paid publisher is BuzzFeed, who received $3.05 million between March 2016 and March 2017.

 

 

It has not been stated yet how much Snapchat is going to allocate to licenses, but most likely fees are going to be based on performance (yes, again like TV does). But the research should be made in order to avoid the domino effect with other platforms, as many publishers provide content not only for Snapchat. “It’s a very tough challenge for media brands,” said Nick Cicero, CEO of Delmondo, that works closely with Snapchat. “There’s almost an instant need to be good at a new platform. So the cautionary tale is understanding the opportunity cost of being on the platform.”

 

Conclusion

These new terms reveal the basic issue which media brands have to tackle with while relying on large social platforms (Snapchat in our case). Such cooperation certainly provide a number of opportunities, but it is vital to remember that big platforms set their own rules. With regard to Snapchat, experts claim that they still have vague ideas about the future of Discover platform and its cooperation with publishers.  “It’s just a better value proposition when you license — the TV business already knows this.”stated the TV network executive.

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