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

The Snapchat app on a smartphone, arranged in St. Thomas, Virgin Islands, USA, on Friday, January 29, 2021.

Gabby Jones Bloomberg | Getty images

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

This weekend, the NBA is forging its annual All-Star game in Atlanta for Covid-1

9. The presence of fans will be limited. The players are only partially enthusiastic and things are far from ordinary for the usual event, difficult for celebrities. But the NBA will be one of the first major sports leagues to play an All-Star event, almost a year after being the first to break its season due to the pandemic.

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

“This is one of our most unique connections 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 good job with this 360 focus and can increase the experience of casual, hardcore and unsportsmanlike fans around their league.”

“Innovative,” NBA chief executive Sam Farber said as he described the partnership. “And another [word] it can be “exhaustive”. We use every feature and tool that Snap has available. We see our partnership with them as a true 360 ​​partnership. “

Snapchat has partnered with the NBA with Snapchat-NBA augmented reality features.

Source: Snapchat

How this partnership works

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

The NBA is also a trader and pays Snap to advertise on Snapchat. The league uses Snapchat Discover channels to enhance content and stimulate a linear setting for its Disney ESPN-owned media partners and Turner Sports-owned AT&T. 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 user for the NBA. Snapchat says it reaches 90% of the age group and 75% of consumers aged 13-34 in countries including the United States, the United Kingdom and France.

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

The parties also took advantage of the daily “NBA Highlights” and said the number of daily viewers of the day of the game around the league’s content had grown by nearly 25% for the 2020-21 season, the company said. And for the 2021 All Star events that will happen in one day, the NBA will shoot exclusive highlights for Snapchat.

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

MediaRadar, an advertising data firm, told CNBC that during the 2019 NBA season, 195 brands were spotted 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 receive,” said MediaRadar CEO Todd Krieselman.

What’s next for Snapchat?

Snapchat, meanwhile, continues to invest heavily in AR, which many say will be a 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 expand in 2016.

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

Deutsche Bank analysts said last fall that the opportunity to advertise for AR lenses and filters could cost $ 4 billion in revenue over the next few years.

In the NBA project in November, Snapchat sent 30 gift boxes, including its QR code features. When scanned, it allows players to be taken to virtual AR projects. And there are whispers that Snapchat may expand its Snap Minis product around sports as leagues such as the National Football League move to contactless payment options.

Snapchat has partnered with the NBA with Snapchat-NBA augmented reality features.

Source: Snapchat

Snapchat declined to comment when asked by CNBC about a potential sports ticket business. But it wants to maintain its current user base – approximately 265 million active users per day – with more AR offers and reach its projected revenue growth of 50% for 2021 and beyond.

And because Snapchat seems to be gaining more share of mobile advertising space, it needs NBA content to attract marketers.

“The more advertisers we have, the more diverse the set of ads we can show,” Peter Selis, senior director of Snap’s advertising products, told investors in February. “This 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 fourth-quarter revenue in 2020, but the company provided a first-quarter adjusted EBITDA forecast well below the consensus expectations of Wall Street analysts. It also warns that changes to Apple’s privacy in iOS 14 could interrupt the search for ads.

It is not clear how the changes will affect Snapchat’s future, but it is a sure bet, whatever the future brings, the sport will be part of it.

The NBA’s global presence, which is even greater than the scope of the NFL, is very valuable. In this contract, the league is a customer who pays and is aimed at young consumers. And Snapchat needs the NBA to help retain its users and grow ads. A big 360.

“This is an extremely multilateral partnership,” Malhotra said. “I think it’s good for both parties.”

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