The NBA will play a key role in Snap’s pursuit of 50% revenue growth

It’s the perfect 360 ratio, and Snap plays a big part in helping the National Basketball Association entertain its young audience.

This weekend, the NBA is taking off its annual All-Star Game in Atlanta due to Covid-19. Fan attendance will be restricted. Players are only partially enthusiastic, and things are far from normal for the usual event with a celebrity. But the NBA will be one of the first major sports leagues to play an All-Star event, nearly a year after it was the first time the season was suspended due to the pandemic.

For this different All-Star game, the NBA relies on Snapchat to engage its Generation Z users who want to get it interested in the sport.

“This is one of our most unique relationships in the sense that the NBA can touch every corner of our platform,” Anmol Malhotra, head of sports partnerships at Snapchat, told CNBC. “They do a great job with the 360 ​​focus and can enhance the experience of comfortable fans, hardcore and non-sports fans around their league.”

“Innovative,” said NBA CEO Sam Farber when describing the partnership. “And another [word] can be ‘comprehensive’. We use every feature and tool that Snap has available. We view our partnership with them as a true 360-degree partnership. ‘

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

The NBA is also a marketer and pays Snap to advertise on Snapchat. The league uses Snapchat Discover channels to enhance content and provide linear engagement for its Disney – ATP-owned media partners, ESPN and Turner Sports. And the league leans heavily on Snap’s augmented reality features to promote its content.

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

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

The parties also use a daily NBA highlight, saying the number of daily viewers on the league content daily is nearly 25% higher for the 2020-21 season, the company said. And for the 2021 All-Star Rally, which takes place in one day, the NBA will capture exclusive highlights for Snapchat.

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

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

“Snapchat can deliver an audience that the NBA would not otherwise get,” said MediaRadar CEO Todd Krizelman.

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

Last July, when the NBA resumed its season in the Orlando bubble, Snapchat created AR lens to enable users to transform their mobile screen to create an NBA court. The company said more than 20 million people are using the feature and plan to introduce new AR features for the NBA playoffs and finals this year.

Analysts at Deutsche Bank said last fall that the opportunity for AR lens and filter advertising could generate $ 4 billion in revenue over the next few years.

In November’s NBA draft, Snapchat also sent 30 prospective gift boxes with its QR code features. Once scanned, it could take players to virtual concept AR experiences. And there are whispers Snapchat could expand its Snap Minis product around sports as leagues like the National Football League switch to touchless payment options.

Snapchat declined to comment on CNBC’s question about a potential sports ticket business. But it wants to maintain its current user base – approximately 265 million daily active users – with more AR offerings and achieve its projected 50% revenue growth for 2021 and beyond.

And because Snapchat wants to get a bigger share of the mobile advertising space, it needs the NBA content to attract marketers.

“The more advertisers we have, the more diverse the range of ads we can show,” Peter Sellis, Snap’s senior director of advertising products, told investors in February. “It makes these ads more relevant and it makes Snapchatters more likely to engage with them. This in turn increases higher ROI 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 far below the Wales analysts’ consensus expectations. And even if Apple’s privacy changes are warned in iOS 14, it could disrupt the demand for ads.

It’s unclear how the changes will affect Snapchat’s future, but it’s a safe bet, no matter what the future holds, sports will be a part of it.

The NBA’s worldwide presence, which is greater than even the NFL’s reach, is too valuable. In this agreement, the league is a paying customer and is aimed at young consumers. And Snapchat needs the NBA to keep users and ads growing. A large 360.

“This is a partnership that is very versatile,” Malhotra said. “I think it benefits both sides.”