The NBA will play a key role in Snap’s quest for 50% revenue growth.

The Snapchat application on a smartphone hosted in Saint Thomas, Virgin Islands, USA, on Friday, January 29, 2021.

Gabby Jones | Bloomberg | fake images

It’s labeled the perfect 360 relationship, and Snap plays an important role in helping the National Basketball Association entertain its young audience.

This weekend, the NBA is cutting back its annual All-Star Game in Atlanta due to Covid-19. The attendance of the fans will be restricted. Players are only partially excited and things are far from normal for the usual celebrity event. But the NBA will be one of the first major sports leagues to replay an All-Star event, nearly a year after it was the first to suspend its season due to the pandemic.

For this All-Star Game different, the NBA relies on Snapchat to engage Generation Z users that it wants to keep interested in the sport.

“It’s one of our most unique relationships in that the NBA can touch every corner of our platform,” Anmol Malhotra, Snapchat’s director of sports partnerships, told CNBC. “They do a good job with that 360 approach and can amplify the experience for casual fans, hardcore fans and non-sports fans in their league.”

“Groundbreaking,” NBA executive Sam Farber said in describing the partnership. “And other [word] it could be ‘full’. We use all the features and tools that Snap has available. We view our partnership with them as a true 360 ​​partnership. “

Snapchat partners with the NBA with Snapchat-NBA augmented reality features.

Source: Snapchat

How this association works

The NBA’s deal with Snapchat is in its seventh year, and it was renewed last June. It’s a revenue sharing model in which Snapchat shares ad revenue around NBA videos with the league. Snapchat says revenue from its six-second video ads has more than doubled year-over-year, but did not disclose financial information.

The NBA is also into marketing and pays Snap to advertise on Snapchat. The league uses Snapchat Discover channels to drive content and drive linear tuning for its media partners ESPN, owned by Disney, and Turner Sports, owned by AT&T. And the league relies heavily on Snap’s augmented reality features to promote its content.

Generation Z, the 13-24 year old age group, is a major consumer of the NBA. Snapchat says it reaches 90% of the age group and 75% of 13-34-year-old users in countries like the US, UK and France.

“It provides us with a new canvas to engage with our fans, and it is also an incredibly important platform for us among young fans,” said Farber, NBA senior vice president of digital strategy and business development. “It is a valuable platform for us to reach what is often a young, hard-to-reach audience.”

The parties also take advantage of a daily “NBA Highlights” show and say that daily game day viewership around league content has risen nearly 25% for the 2020-21 season, the company said. And for the 2021 All-Star events, which will take place in one day, the NBA will capture exclusive Snapchat highlights.

Bob Carney, the NBA’s senior vice president of social and digital content, said the one-day All-Star event fits perfectly with Snapchat’s strategy. “It will be packed with incredible moments,” Carney said.

MediaRadar, an advertising data firm, told CNBC that during the 2019 NBA season, 195 brands were seen advertising on NBA-sponsored Snapchat Discover channels, including State Farm, Call of Duty and Amazon.

“Snapchat can deliver an audience that the NBA wouldn’t have otherwise,” said MediaRadar CEO Todd Krizelman.

What’s next for Snapchat?

Meanwhile, Snapchat has continued to invest heavily in AR, which many believe will be the technology that ushers in a new era of computing beyond the smartphone. Snapchat introduced AR features in 2015 and used the NBA user base to grow it in 2016.

Last July, when the NBA restarted its season in the Orlando bubble, Snapchat created AR glasses to allow users to transform their mobile screen to create an NBA court. The company said more than 20 million people used the feature and plans to roll out new AR features for the NBA playoffs and finals this spring.

Deutsche Bank analysts said last fall that the AR lens and filter ad opportunity could be worth $ 4 billion in revenue over the next several years.

In the November NBA Draft, Snapchat also sent out 30 gift boxes to prospects, including their QR code features. When scanned, it allowed players to be drawn into virtual draft augmented reality experiences. And there are rumors that Snapchat could expand its Snap Minis product around sports as leagues like the National Football League move to contactless payment options.

Snapchat partners with the NBA with Snapchat-NBA augmented reality features.

Source: Snapchat

Snapchat declined to comment when asked by CNBC about a possible sports ticketing business. But it wants to maintain its current user base, roughly 265 million daily active users, with more AR offerings and achieve its projected 50% revenue growth by 2021 and beyond.

And as Snapchat looks to gain more share in the mobile ad space, it needs NBA content to attract marketers.

“The more advertisers we have, the more diverse the set of ads we can show,” Peter Sellis, Snap’s senior director of advertising products, told investors in February. “That makes these ads more relevant and makes Snapchatters more likely to engage with them. This, in turn, leads to a higher return on investment and makes us more efficient with our inventory.”

In February, Snapchat reported $ 911 million in revenue for the fourth quarter of 2020, but the company provided an adjusted EBITDA forecast for the first quarter much lower than the consensus expectations of Wall Street analysts. And it also warns that Apple’s privacy changes in iOS 14 could disrupt its advertising demand.

It’s unclear how the changes will affect the future of Snapchat, but it’s a safe bet, whatever the future entails, sports will be a part of it.

The NBA’s global presence, which exceeds even the reach of the NFL, is too valuable. In this compact, the league is a paying customer and targets young consumers. And Snapchat needs the NBA to help keep its users and grow ads. A great 360.

“It is an association that is extremely multifaceted,” Malhotra said. “I think it benefits both parties.”


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