Snapchat wants to stop sharing ad revenue with its media partners

Snapchat says it’s done sharing with media companies.

The red-hot messaging app wants to make a major change in the way it works with companies who supply it with content for its “Discover” section.

Instead of sharing ad revenue that section produces, Snapchat wants to pay content partners a flat license fee up front, and keep the ad money for itself.

That’s a switch from the terms Snapchat offered since it launched Discover in 2015. Up until now, it has let publishers sell ads against their own content, and keep 70 percent of that revenue; if Snapchat’s own ad sales team sell an ad, the two sides split the revenue down the middle.

Other big digital platforms, including Facebook and Apple, have offered similar programs to publishers who let them host their content on their own apps.

The new terms, which Snapchat has started proposing over the last few weeks, means the company will have full control over its ad inventory as it gears up for a public offering.

And for publishers, it means they will have a guaranteed payday when they create custom content for the app, instead of just hoping to make money. But the new deal also limits the money publishers can make from their stuff.

Snapchat looks as if it will extend the new terms beyond its Discover program. It has told content companies in talks to create “Snapchat Shows” — a new format similar to “Good Luck America”, the short-form video series Snapchat makes itself — that it wants to use the license model instead of a revenue share for those shows as well.

Industry sources say Snapchat reps have started informing publishers about the new terms over the last few weeks, and would like to have new deals set up in the next month.

They may have to do some negotiating. Some Snapchat publishing partners tell me the new terms make sense to them. Others are bristling, and say they don’t want to create content for the company without any control over the way it’s sold.

The business terms aren’t the only changes Snapchat is making to Discover. Earlier this month it changed the app so that “stories” users create show up in the app ahead of Discover content made by professional publishers, which means that stuff will have a harder time generating traffic.

A Snapchat rep declined to comment. Vox Media, which owns this site, is a Snapchat publishing partner.

The timing of the new terms seems significant. They come months after the company hired Viacom’s Jeff Lucas to head its own sales team. And they come at the same time Snapchat has begun prepping for a 2017 IPO.

The new terms also illustrate one of the truths media companies must face as they increasingly rely on a “distributed content” strategy, where they hand their stuff over to big platforms like Facebook and Snapchat instead of keeping it on their own properties: If you want to play on someone else’s turf, you have to play by their rules.

Even when they change the rules.

Additional reporting by Kurt Wagner.


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