NBA to Play Key Role in Snap’s 50% Revenue Growth

It is labeled as the perfect 360 relationship, and Snap plays a considerable role in helping the National Basketball Association entertain its young audience.

This weekend, the NBA is reducing its annual All-Star game in Atlanta, thanks to Covid-19. Fan participation will be restricted. The players are only partially enthusiastic, and things are far from ordinary for the usual, hard-to-celebrate event. But the NBA will be one of the first major sports leagues to return to an All-Star event, almost a year after it was the first to suspend its season due to the pandemic.

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

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

“Innovative,” said NBA executive Sam Farber when describing the partnership. “And another [word] it could be “comprehensive”. We use every feature and tool that Snap has at its disposal. We consider our partnership with them to be a true 360 ​​”partnership.

The NBA deal with Snapchat is in its seventh year, being renewed in June last year. It’s a revenue-sharing model where Snapchat splits advertising revenue around NBA league videos. Snapchat says revenue from its six-second video ads has doubled from year to year, but did not disclose financial data.

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

Gen Z, the 13-24 age group, is a major consumer for the NBA. Snapchat says it reaches 90% of the age group and 75% of users between the ages of 13 and 34 in countries such as the US, the UK and France.

“It gives us a new canvas to interact with our fans and is also an incredibly important platform for us young fans,” said Farber, NBA’s senior vice president of digital strategy and business development. “It’s a valuable platform for us to reach what is usually a hard-to-reach young audience.”

The parties also benefit from a daily NBA Highlights show and say the number of daily viewers of games around the league’s content is up nearly 25 percent for the 2020-21 season, the company said. And for the all-day events of 2021, which will take place in one day, the NBA will capture exclusive highlights for Snapchat.

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

MediaRadar, an advertising data firm, told CNBC that in 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 provide an audience that the NBA might not otherwise reach,” said Todd Krizelman, CEO of MediaRadar.

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 develop it in 2016.

In July last year, when the NBA resumed its season in the Orlando balloon, Snapchat created AR lenses to allow users to transform their mobile screen to create an NBA field. The company said more than 20 million people have used the feature and plans to launch new AR features for the playoffs and NBA Finals this spring.

Deutsche Bank analysts said last fall that the opportunity for ads with AR lenses and filters could have revenue of $ 4 billion over the next few years.

In the November NBA Draft, Snapchat also sent out 30 gift boxes for potentials, including QR code features. When scanned, it allowed players to be taken to virtual AR design experiences. And there are whispers Snapchat could expand its Snap Minis product around the sport, like leagues like the transition of the National Football League to touchless payment options.

Snapchat declined to comment when asked by CNBC about a potential sports ticket business. But it wants to support its current user base – about 265 million daily active users – with more AR offerings and achieve projected revenue growth of 50% by 2021 and beyond.

And as Snapchat seeks to gain more from mobile advertising space, it needs NBA content to attract marketers.

“The more advertisers we have, the more diverse the set of ads we can display,” Peter Sellis, chief executive of Snap advertising products, told investors in February. “This makes these ads more relevant and makes Snapchatters more likely to interact with them. This, in turn, increases return on investment and makes us more efficient with our inventory.”

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

It is not clear how the changes will have an impact on the future of Snapchat, but it is a safe bet no matter what the future entails, the sport will be part of it.

The global presence of the NBA, which is greater than reaching the NFL, is too valuable. In this pact, the league is a paying customer and targets young consumers. And Snapchat needs the NBA to keep its users and develop ads. A great 360.

“It’s an extremely versatile partnership,” Malhotra said. “I think both sides benefit.”