Why Snap's Deal With Time Warner Shows Content Is King

Snapchat ()

Snapchat ()

Last week, Time Warner (TWX) announced a deal with Snapchat owner Snap (SNAP) to bring more content to the social networking app, with Time Warner developing shows specifically for Snapchat. With Snapchat struggling to find a way to grow its daily active user count, adding differentiated content may be one of the answers.

In the press release, we got an outline for what the Time Warner-produced shows could look like, based off what Snapchat has done with previous media outlets. The shows, which run between 3 and 5 minutes, are "hyper-visual, featuring motion graphics, split screens, quick cuts and more, inspired by the expressive communication Snapchatters use to talk to their closest friends."

Nick Bell, Vice President of Content for Snap, further added that the partnership will help Snap as it continues to add different types of content, "including scripted dramas, comedies, daily news shows, documentaries, and beyond."

Given the fact the deal focuses on Snapchat's mobile platform, shorter shows -- under 7 minutes -- seems to make sense. So we're not going to see a fully fledged spin-off of Game of Thrones on Snapchat, but we could see a show based on the dragon's journeys, as it wouldn't necessarily need to take up a full hour. We could also see more short clips from Full Frontal with Samantha Bee, the hit late night show that airs on TBS.

As part of the two-year deal, Time Warner said it will have advertising from HBO, Turner and Warner Bros., so it makes sense that shows from Turner and Warner will be on the platform. The Wall Street Journal mentioned we could see something from Wonder Woman given the enormous popularity of the movie. There may also be shows developed by HBO, which would be a coup for Snap, as HBO is still the preeminent producer on television when you take into account shows like Game of Thrones, Silicon Valley, Veep, Big Little Lies, and more.

These Snapchat shows aren't going to compete for Best Drama at the Emmy Awards, but they could help keep users engaged on the platform during a commute to work, on their lunch break, or in a small snippet of their day when they have some downtime.

Analysts believe the deal could be the lift Snapchat needs to become a bigger platform and help grow ad revenue (it's worth noting here that Snap also has other original deals with the likes of NBC, ABC and others).

"In our view, a deal of this size with one of the premiere media players highlights the power of Snapchat in reaching millennials," Drexel Hamilton analyst Brian White wrote in a research note.

Social media networks are valued not just on their daily active user figures, but on time spent on the platform. Facebook (FB), via its app, Instagram, and Messenger, have captured 50 minutes a day of its users time (Note: WhatsApp is not included in these figures). Snapchat seems to be doing a decent job with engagement, as the company's Chief Strategy Officer Imran Khan recently said its users spent over 30 minutes a day on the platform, "largely because of the unique content on our platform."

Snapchat has had mixed success showing advertisers why its platform is an area where they must spend their dollars. In the first quarter, daily active users rose to 166 million, up just 5% sequentially. If the company's isn't going to grow its user count to the sky, a la Facebook, it needs to show advertisers that its users are committed to the platform for the long term, which is where this Time Warner deal comes into play.

With Facebook reportedly seeking original programming for its own platform, this is one area where Snapchat has an advantage. Content, and more specifically, differentiated content that connects with audiences, winds up being the big winner in the long run as people look for ways to spend their time.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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