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Snapchat wants to end ad-share deals with Discover media partners and instead pay publishers an upfront license fee for their content, Recode reports.
The company is discussing terms with its publishers now, with aims to introduce the new system next month. So far, the response from publishers has been mixed, and they are right to fret about what this deal could mean for them.
Snapchat’s proposal is akin to the deals between traditional TV broadcasters and producers, where networks pay studios upfront for film and TV content, and then keep all the ad revenue. This pivot represents a remarkable about-face from Snapchat’s early promise split ad revenue with publishers, and there are many ways to deconstruct and analyze the possible implications of this announcement:
- Gives Snapchat full control over its inventory. It’s understandable that Snapchat might want full control over its ads to accelerate revenue as it builds up for an IPO. This explains why Snapchat hadn't allowed publishers to sell ads when it premiered its API earlier this month. Preventing publishers from integrating with its API can act as a sort of divide–and-conquer tactic for Snapchat deal with third-parties on a piecemeal basis.
- Strips publishers of control over ads that run with their content. Snapchat might consult publishers on an ad hoc basis, but publishers probably won't be at the negotiating table for these ad deals. This limits the opportunities for publishers to earn revenue off Snapchat, and even carries brand equity risk if an unsuitable ad runs alongside their content.
- Potentially disincentivizes quality content on Snapchat. Snapchat’s offering to publishers is not a fixed licensing fee and distribution. But will publisher's value distribution that’s unlinked from ad revenue? Distribution’s only tangible benefit now is from a brand-building perspective. It’s hard to tell whether this alone will be a sufficient incentive for publishers to produce quality content and grow their audience.
- Guarantees publishers steady and fixed revenue. This security might be welcomed by publishers operating in the volatile world of digital advertising. This will encourage non-partnering media companies to secured a coveted spot as a Discover partner. Past experience suggests these companies relish upfront money too, as evidenced with Facebook Live. But being paid upfront means that publishers miss out on a valuable slice of Snapchat's ad revenue, which is expected to top $1 billion in 2017.
- Makes publishers entirely dependent on Snapchat. This would be a terrible deal for publishers. Agreeing to Snapchat's terms would be tantamount to signing over a significant portion of their fate and ownership to the photo-sharing platform. By paying publishers directly, Snapchat can influence publishers to abide more strictly by its own terms.
- Potentially helps Snapchat to protect itself from rivals. At the same time, paying publishers directly could allow Snapchat to reap the benefits of content exclusivity. Tying publishers down to creating content only on its platform could be a massive differentiator for Snapchat versus rivals like Facebook, which are moving quickly to integrate Snapchat-like features into their platforms.
- Highlights the perennial dangers facing digital publishers. Those who tether their strategies to social platforms for broad distribution do so at an immense risk. On the other hand, focusing solely on building out their own properties without consideration to social platforms is also a dangerous strategy.
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