Why NBC just took a big stake in Snapchat's parent

Mike Snider

USA TODAY

NBCUniversal has snapped up a $500 million stake in the tech industry’s latest social media darling.

Snap Inc., the parent company of Snapchat, the company behind snapchat debuts on the New York Stock Exchange on March 1, 2017, under the ticker symbol SNAP. Shares are expected to price March 1 after the market closes and begin trading on Thursday. Snap is aiming to sell shares around $14 to $16 a share, giving the company a valuation of up to $22.2 billion.

NBCUniversal's investment in Snap Inc., as part of its IPO Thursday, not only expands parent company Comcast's growing digital empire, but also strengthens Snapchat's aims to land big-name content on the popular app.

Snap had its initial public offering Thursday and shares, originally priced at $17 per share, opened at $24. On Friday Snap (SNAP) shares rallied another 11% to $27.09.

The investment is part of NBCUniversal's evolving digital content strategy. "We will continue to be aggressive as digital content consumption increases," CEO Steve Burke said Friday in the letter to employees, a copy of which was provided to USA TODAY.

"Investing in Snap is a key step in that direction. ... It is rare to have the opportunity to invest at this stage in a company as visionary and dynamic as Snap, and it is a compliment that they chose NBCU as a partner."

NBC has built a growing relationship with Snap. During the Summer Olympics, NBC and Buzzfeed partnered on a Discover channel on the app that generated more than two billion views, Burke says.The Voice, Saturday Night Live and E1 News' The Rundown have all had Snapchat series and The Voice is currently conducting a Snapchat contest for a chance to appear on the show and audition for its next season. "We expect to launch even more Snapchat shows with additional NBCU brands in the coming weeks," he said.

NBCUniversal's stake is the only one made by a strategic media investor and the company plans to hold its stake for at least 12 months, according to CNBC's Andrew Ross Sorkin, who first reported the investment.

Counting the Snap investment, NBCUniversal has invested more than $1.5 billion in digital businesses over the last 18 months, Burke says. Those investments include $400 million in Buzzfeed and $200 million in Vox Media, and the acquisition of youth and amateur sports app SportsEngine for an undisclosed sum in July 2016.

Parent company Comcast's $3.8 billion acquisition of DreamWorks Animation in April 2016 made the company the majority owner of YouTube channel Awesomeness TV.

NBCUniversal has assisted Snap's goals to become a bigger media player. Since unveiling its Discover platform two years ago, Snapchat has grown its TV content with short shows from NBC, ABC (The Bachelor) and its own original politics show Good Luck, America. Three weeks ago, Snap also made a deal with Discovery Communications to create shows based on Shark Week and Mythbusters.

Screen shot of Snapchat Stories content on a smartphone.

And Snap has some Hollywood leadership on board, too. Last month, Michael Lynton, who had served as Sony Pictures Entertainment CEO for 13 years, stepped down to serve as Snap's chairman. He had been on Snap's board since April 2013.

Snap is moving into new territory with its TV-styled content play, says Forrester marketing analyst Jessica Liu in a report out Thursday. The company has begun sharing ad revenue deals with media partners and seeking upfront ad commitments of $100 million-plus, she said.

"But these efforts are unproven," Liu said. "To deliver its new positioning, Snap will need to listen to advertisers as intently as it listens to its new investors."

More:

Snap shares rise on second day of trading

Snap shares surge 44% in IPO debut

TV shows go into overdrive on Snapchat

Follow USA TODAY reporter Mike Snider on Twitter: @MikeSnider.

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