NBCUniversal Invests $500 Million in Snap IPO Amid Digital Push

(Bloomberg) -- Comcast Corp.’s NBCUniversal invested $500 million in Snap’s initial public offering, expanding its reach into digital media by acquiring a stake in the $28 billion disappearing-photo service popular with millennials.

NBC Chief Executive Officer Steve Burke, in a memo to staff Friday, called the move a “significant milestone” in the media company’s partnership with Snap. The Comcast unit will be subject to a 12-month lockup period as part of its investment, meaning it can’t sell Snap’s shares for a year, according to a person familiar with the matter.

Snap surged 44 percent Thursday on their first day of trading, and gained another 12 percent Friday.

With the latest investment, NBC has now committed over $1.5 billion to digital businesses in the last 18 months, including two separate $200 million investments in BuzzFeed, and a $200 million investment in Vox Media, the online publisher of the Verge, Eater and Recode.

Last summer, NBC produced a Snapchat channel featuring Olympic content run by BuzzFeed, which generated over two billion views, Burke said in the memo. With the Snap investment, NBC will expand its partnership with the social-media network and BuzzFeed for the 2018 Winter Games in South Korea, and launch more shows with additional NBC brands in the coming weeks, he said.

While NBC is investing heavily in digital media, the company is also scaling back its assets in traditional television. In the past two months, NBC turned one of its cable TV channels, the male-theme Esquire Network, into an online-only channel, and shut down its crime-themed cable network Cloo. NBC also owns cable networks like USA and MSNBC.

“Looking forward, we will continue to be aggressive as digital content consumption increases,” Burke said in the memo. “Investing in Snap is a key step in that direction.”

Snap Debut

Snap raised $3.4 billion in its initial public offering, pricing the shares above the marketed range. The company sold 200 million shares for $17 each.

Snap makes the majority of its $404 million in revenue from selling advertising on its disappearing-photo app. While it’s only been monetizing Snapchat for about two years, continuing the rapid clip of sales growth will be key to keeping investors happy with the $30 billion company.

The investment from NBC gives Snap deeper ties to an established player in an market it’s trying to steal ad dollars from: TV. The newly-public company has been building out its media business, fighting to convince marketers to shoot video in the smartphone-friendly vertical format, instead of the conventional portrait figuration for TV.

It’s been a challenge. Brands have to make two versions of the same ad if they want to show it on Snapchat and on TV. To get on the app, most of the ad inventory is sold directly through sales representatives instead of through websites or an automatic bidding system. Last year, the company cut a deal with Viacom Inc. to help sell its ads, and in January broadly opened up an API (application programming interface) that lets brands buy and measure ads in real time.

“From an advertising perspective, agencies and advertisers look to be taking a wait-and-see approach,” Shyam Patil, an analyst at Susquehanna Financial Group LLP, wrote in a note Friday. “Snapchat advertiser interest is high, and the platform is considered a good branding play to reach millennials with innovative and intriguing ad units.”

That said, Snap is still considered experimental at less than 5 percent of social ad budgets.

To contact the reporters on this story: Gerry Smith in New York at gsmith233@bloomberg.net, Alex Barinka in New York at abarinka2@bloomberg.net.

To contact the editors responsible for this story: Crayton Harrison at tharrison5@bloomberg.net, Paul Barbagallo, Cecile Daurat

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