Investors have been fretting about Viacom Inc.'s cable TV
fortunes and hoping the company will cook up new ways to profit in
the digital economy. On Tuesday, as the media company reports
quarterly results, it will have a new partnership to tout on that
front.
The shiny new object: a deal with Snapchat Inc., the popular
vanishing messages app that already carries content for
Viacom-owned networks Comedy Central and MTV. Viacom and Snapchat
are taking their deal a step further with a multiyear agreement
that allows the media company to sell advertising on Snapchat's
behalf.
For Snapchat, the move could help lure in more big advertisers
to the millennial-focused platform. Viacom gets a chance to flex
its ad sales muscles and direct some attention away from soft TV
ratings, a sagging share price and drama related to the declining
health of its 92-year-old controlling shareholder, Sumner
Redstone.
With the MTV generation now in adulthood, Viacom is keen for any
way to connect with the young viewers it has specialized in
reaching.
Under the deal, Viacom will have exclusive third-party rights to
directly sell advertising surrounding Snapchat's content. That
includes pop-up "Live Stories" that cull together posts from users
in specific geographic locations or during a holiday.
Viacom will also add two new channels to Snapchat's "Discover"
page, where media outlets such as CNN, Vox, Mashable and The Wall
Street Journal also have channels. MTV, which currently operates an
international channel, will now get a U.S. version. Comedy Central,
which produces a U.S. channel, will expand internationally. The
company said it would further invest in making programming geared
toward Snapchat.
"We had early on made a big commitment to developing premium,
original content for the channels we had on the platform," said
Viacom Chief Financial Officer Wade Davis. "Based on the success we
had, we started talking about what we could do beyond that."
Viacom Chief Executive Philippe Dauman, who succeeded Mr.
Redstone as executive chairman last week, will discuss the Snapchat
deal during the earnings call Tuesday, a person familiar with the
matter said.
Mr. Dauman has taken an unusually granular interest in Snapchat,
leading the company's efforts to work with the upstart messaging
app. Last fall, Mr. Dauman said he met with the app's CEO Evan
Spiegel at the bar at Toscana Restaurant in Los Angeles. He got so
involved in the creation of Comedy Central's icon on Snapchat that
he weighed in on its color, suggesting it visually pop on the
Discover page. It is the only green one.
The agreement comes as Snapchat tries to grow its revenue and
expand its fledgling advertising business. Ad buyers say that while
the app offers the potential to reach coveted young consumers, many
marketers are hanging on the sidelines due to Snapchat's expensive
prices and lack of ad sales organization.
"Since launching ads just over a year ago, Snapchat has
continuously worked to strengthen its advertising team and product
offerings, most recently restructuring the team," a Snapchat
spokeswoman said.
An accord between Snapchat and Viacom may feel like a teenager
letting his middle-aged dad tag along to the party because there is
a better chance of scoring some booze. Viacom has long held
relationships with the large ad buyers and brands that plunk down
major dollars. Snapchat, though it boasts 7 billion video views a
day, is a relative advertising newbie.
Marketers like General Electric Co., Coca-Cola Co. and Samsung
Electronics Co. have advertised on the platform. In May, Snapchat
raised more than $500 million in funding, valuing the startup at
$16 billion.
"There's a lot of TV buyers that want to buy Snapchat more and
more," said Imran Khan, chief strategy officer of Snapchat. Mr.
Khan said that the company will continue to sell "basically most of
our inventory," but that the Viacom deal "reduces friction" and
lets big brands buy Snapchat ads as part of a larger TV package.
Snapchat has a revenue-sharing agreement with Viacom for the ads it
sells.
Jeff Lucas, Viacom's ad sales chief, said that both companies
are targeting the same young viewers and are a "natural match."
"We identified early on the similarities in our audience with
Snapchat as they were starting out. They realized early on about
our access to the ad market in terms of selling against
millennials," said Mr. Lucas, who advises Snapchat on advertising
matters.
As the television industry struggles with falling ratings,
Viacom has hawked a new data-focused product to better target
viewers across its shows. Viacom's custom content hub "Velocity"
has also fashioned ways to integrate brands into television
programs.
The Snapchat deal allows Viacom to sell advertising on Discover
for its own content and for that owned by Snapchat. Last year
Snapchat abandoned its dedicated Snap Channel, but still posts its
own content to Discover. Last month it debuted a new political
campaign show called "Good Luck America." Viacom wouldn't sell ads
on the Discover pages of other media companies, Snapchat said.
Keach Hagey contributed to this article.
Write to Steven Perlberg at steven.perlberg@wsj.com
(END) Dow Jones Newswires
February 08, 2016 23:05 ET (04:05 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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