Snapchat may be fun for users, but the app is starting to mean serious money for the media.Â
Numerous publishers are making hundreds of thousands of dollars per year on Snapchat, with a select few bringing in tens of millions, according to multiple people familiar with the matter. These profits come at a crucial time, as the media industry’s patience in platforms such as Snapchat, Facebook and YouTube has been waning due to tepid monetization.Â
In the past two years, Snapchat has emerged as a competitor to the likes of Facebook and YouTube, fighting the platform giants for both publisher content and user attention. On Snapchat, publishers are a part of Discover, the two-year-old network that presents publishers’ daily content to the app’s audience of more than 150 million daily users (Mashable is a Discover partner). Publishers earn revenue from video advertising within an edition; the media outlets can choose to sell these ads on their own or through Snapchat or Viacom. Snapchat pays some publishers a licensing fee, as well.Â
The specifics of Snapchat’s financial allure varies among publishers, according to sources. For top partners that bring in millions of daily views and sell their own ad inventory, the revenue has reached seven and eight figures annually. Those numbers were achieved both in 2015, the first year of Discover, and again in 2016, for at least three publishers, and this revenue was enough to cover the expense of producing Discover content. Snap itself was estimated to generate $366.69 million in ad revenues in 2016 and $935.46 million in 2017, according to eMarketer.Â
Snapchat isn’t the largest chunk of these publishers’ revenues, with the majority coming from over-the-top and syndication, but these numbers earlier reports from Bloomberg, Digiday and Business Insider that categorized the earnings as “meager.”Â
Business Insider Tuesday published a confidential report from Digital Content Next (DCN), a digital media trade body, that included average revenues publishers make from third-party platforms. The stories caused waves in the media industry for appearing to confirm skepticism over whether it will be sustainable for media companies to rely on revenue from companies like Snapchat and Facebook.
Yet, Business Insider referred to DCN’ data in a way that skewed the present figures. “Snapchat generated $192,819 for each publisher in the sample,” the article reads. That average, represented in the graph below, pulls anonymized financials from 17 participating media outlets, but not all 17 publishers make revenue from Snapchat.Â
The publishers could have made anywhere from $0 on Snapchat to the tens of millions for all of 2016. So the average of $192,819 for the first six months of 2016 is skewed by the broad range of the 17 publishers.Â
Moreover, the financial data is from the first half of 2016 and, as of the end of 2016, only six of DCN’s partners have channels on Discover.
Snap declined to comment but did indirectly point out to Business Insider that the figures in the DCN report were not representative of the opportunities partners have within Discover, in a statement to Business Insider.Â
DCN’s report reads that Snapchat “holds little to no short-term financial interest” for publishers that were interviewed. True, that may indeed be the case for major television networks like ABC/Disney, NBCUniversal and Turner Broadcasting, which each have deals and create shows for Snapchat Discover but still pull the majority of their revenue from television and internet-based services.Â
“Overall revenues are meager if you look at the collective dollars coming from social media platforms to publishers.”
“I would agree that overall revenues are meager if you look at the collective dollars coming from social media platforms to publishers â especially when you consider that premium publishers provide much of the trusted content for the consumers and advertisers on these platforms,” Jason Kint, CEO of DCN, wrote in an email to Mashable.Â
“In regards to Snapchat, it’s obviously early on in their expansion and clearly they represent desirable audience and format,” he continued.
For individual Snapchat Discover partners like traditional magazines and web outlets, however, the platform has become a crucial piece of the financial pie. Partners work hand-in-hand with Snapchat to determine how to make more money off the platform and are increasing their efforts to maximize the opportunity for profit â such as hiring more editors and producing more original, scripted content, rather than repurposing pre-existing content from other platforms â in 2017, three people said.Â
Snap has said these close relationships are why its network is closed to a limited set of partners, rather than being open like Facebook and YouTube.
There is still concern regarding the future sustainability for partners and whether Snapchat can handle new additions to its formal publisher lineup. As one media executive who does not currently oversee a Discover channel but is in conversations with Snap about launching one, said, “The more they launch new channels, the harder it is to get an audience. When itâs all said and done, we would want to get at least two times return.”
Some advertisers are upping their spend on Snapchat this year, as well. One advertiser that has purchased app-install ads on Snapchat told Mashable it spent close to six figures in 2016 and is now budgeted to spend more than six figures this year. Â
“As their set of targeting options gets bigger and better, weâre seeing better performance and good volume,” the advertiser said. Still, the company said the percentage of its digital spend is still “barely double-digits” â a tiny amount compared to what goes to Facebook and YouTube. Â
Snapchat is in conversations with major advertising companies, including WPP, Omnicom and Publicis, and seeking $100 million to $200 million annual spend commitments, The Wall Street Journal reported.Â
Those commitments from publishers and advertisers are critical for Snap as it preps for an initial public offering that could come as early as March. The company is seeking a valuation of $25 billion.Â
“$25 billion? No, it’s not absurd,” a publisher said.Â