The messaging app's most recent video production deal came this week with entertainment giant Metro-Goldwyn-Mayer. Last week, it was Vice Media, and earlier this year, Discovery Communications (DISCA) - Get Report signed a video partnership with the Venice, Calif. company as did A+E Networks. Time Warner's (TWX) Turner Networks, among others, got into the Snap game last year.
The deal with MGM Television marked Snap's first production deal with a major Hollywood studio, albeit a mini-major. The partnership calls for MGM to produce original series for Snapchat's Discover platform, the company's engine for advertising growth. The content agreement follows an announcement from Vice Media a week ago to produce short-form video programming exclusively for Snap. Terms of the deal with MGM were not disclosed.
Taken together, the array of video deals highlight Snap's aim to grow advertising revenue via video tailored to its brand and target demographic: the young people who comprised the bulk of the app's 158 million average daily users (as of Dec. 31). Snap, after all, prefers to be known as a camera company, making video central to its mission.
Mobile advertising is the fastest growing bucket in the ad market. Digital ad spending is expected to exceed linear TV spending in 2017, largely because of a jump in mobile, Magna Global, the worldwide ad agency said in December. By 2021, mobile advertising is forecast to grow to $215 billion, or 72% of total digital budgets, Magna said.
Snap was gaining on Wednesday after Drexel Hamilton became the second investment firm to initiate coverage of the social media app with a buy rating. Shares of the Venice, Calif. company were surging 6.8% to $21.78.
Indeed, Drexel's report emphasized that Snap's biggest attraction may be a willingness to try things that other sites -- specifically Facebook (FB) - Get Report -- may be reluctant to attempt. Compelling short-form video is at the top of the list.
"Snap views itself as 'a camera company' and we believe this fosters a mindset for innovation to transcend the boundaries of its competitors," Drexel media analyst Brian White said in the investor note. "Snap has created a unique experience with Snapchat and one that we believe can increasingly be monetized with mobile advertising. The size of the advertising market is significant and mobile advertising is growing at a blistering pace."
The success of the deals will rest on whether the content can distinguish Snap from the overabundance of video, short-form and otherwise, being produced by other platforms focused on young consumers. Comcast's (CMCSA) - Get Report NBCUniversal has also secured a series of content deals for its Watchable platform as has Verizon (VZ) - Get Report for its Go90 service.
Treating Snap as both a rival and a partner, Comcast in August secured a partnership to stream uniquely-packaged versions of The Voice to the messaging app ahead of its television premiere. Saturday Night Live, among other shows, also airs on Snapchat.
The MGM deal also serves to highlight the increasing interest that legacy movie studios have in diversifying their production. MGM, which was in bankruptcy six years ago, is close to taking full ownership of Epix, the premium cable TV from current co-owners, Viacom (VIAB) - Get Report and Lions Gate Entertainment (LGF.A)