In Discover, Snap Sees a Bright Spot as It Tries to Fend Off Facebook

https://www.nytimes.com/2017/05/07/technology/discover-snap-rival-facebook.html

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SAN FRANCISCO — When Snapchat unveiled Discover, a place in the messaging app where media companies can publish original stories, one of the publishers that jumped to get onto the platform was the website Mashable.

Mashable quickly sank time and money into making daily videos and stories for Discover to appeal to Snapchat’s young audience. The work — which, like almost everything on Snapchat, disappeared after 24 hours — was costly for Mashable.

Even so, Mashable is today making money off Discover under a partnership with Snapchat’s parent company, Snap, to sell ads against its videos and stories. Mashable now counts Discover as an important source of revenue.

“Snap has given us a valuable, loyal, young audience of millions who can be hard to reach on other platforms,” said Greg Gittrich, the chief content officer at Mashable. “It’s very profitable for us.”

Mashable’s experience illustrates how Discover has emerged as a bright spot for Snapchat and its parent company. Discover’s performance is important as Snap, which had its initial public offering in March and is poised to deliver its first earnings as a public company on Wednesday, has been under attack from Facebook.

Facebook and its other apps, including the photo-sharing site Instagram, have systematically copied some of Snapchat’s features over the past year. Given Facebook’s immense size — it has 1.3 billion people who interact with the social network or one of its apps each day, compared with about 161 million users for Snapchat — investors are closely watching for whatever might keep Snap distinctive and give it a competitive edge.

Discover, which was introduced in 2015, may be part of the answer. On Snapchat, Discover resembles a menu of channels, arranged by publisher brand. People can tap on any channel and leaf through that day’s set of stories and videos. More than 100 million Snapchat users view content on Discover each month, according to the company.

Signs of success on Discover could help Snap reach more deals for original television shows, , an initiative the company has been building out for many months. It could also help keep people loyal to Snapchat, even as the six-year-old company has acknowledged that user growth has been slowing. And advertisers concerned about their ads running alongside questionable content may pay a premium to be on Discover.

“Our focus is to help our partners develop businesses that are financially significant, and sustainable, in turn funding future investment in quality storytelling,” Nick Bell, vice president of content at Snap, said of Discover. High-quality storytelling on Discover should also help build a highly engaged and loyal audience on Snapchat, he said.

Although Snapchat’s number of users is smaller than Facebook’s, publishers said they could still reach a lot of people on Discover.

Steven Kydd, a founder of Tastemade, a digital food and lifestyle publication, said his company got over a billion views a month on Discover. And people don’t just skip over the videos and stories — more than 28 percent of viewers in the United States visit Tastemade’s Discover channel at least five days a week, he said, and his daily audience has grown more than 4.5 times as large over the past year.

As a result, Tastemade has created a studio it can use to make daily videos for Discover, which are produced in eight languages across three channels in the United States, Britain and France. Tastemade now generates a significant amount of revenue with Discover, said Mr. Kydd, who declined to say whether the effort was profitable.

All of this is a change from the early experiences that some publishers had with Discover. Creating videos and stories for the platform was initially a time-consuming, money-losing effort, according to five people who produced Discover content for publications that included Bleacher Report, NowThis News, Mashable and Refinery29. These people asked to not be identified because they had signed nondisclosure agreements with their companies.

“At first everyone thought they could just make another video of an exploding watermelon” for Discover, said Michael Brown, a freelance video producer who has made videos for both Discover and Facebook. He was referring to a cheap-to-produce BuzzFeed video that went viral on Facebook Live. “But kids are smart, and they want more than that.”

Now publishers have hired teams of designers, video editors and writers focused solely on making content that fits Snapchat’s unique formatting requirements. That includes videos that are shown vertically, not horizontally, on a phone screen. Stories are also told in a series of “snaps,” or snippets.

To keep what appears on Discover distinctive, Snap has asked publishers not to overlap too much with one another. The messaging app requested that Mashable be a technology outlet on Discover, for example, even though Mashable covers an array of topics. Snap has asked others to avoid tabloidlike fare that might increase the number of viewers for a single story at the expense of building a loyal audience. Last year, Snap also cracked down on some risqué content on Discover.

Discover is evolving in other ways. While it was originally known for lighter fare aimed at teenagers, Discover recently expanded to more than 60 publishers, TV networks and studios from an initial 11, including news outlets like The Washington Post, The Wall Street Journal and The New York Times.

Snap is still experimenting with how to make Discover as lucrative as possible. The company has made some recent changes to its financial deals with publishers, according to four people involved in the deals who were not authorized to discuss the private contracts.

Snapchat initially sold ads against the stories in Discover and shared that revenue with the publishers. Publishers who wanted to sell ad space themselves had to meet certain revenue minimums, or pay the difference.

Now, Snap has signed some licensing-type agreements, in which publishers are paid a flat fee for their work. This model theoretically limits the risk to publishers by giving them a guarantee of some money, even as Snap tries new ad formats that may fall flat.

Last year, Snap paid out $57.8 million to its publishing partners, up from $9.6 million in 2015, according to the company’s public offering filing.

Facebook may find it difficult to emulate what’s on Discover. In 2015, Snap wrote in a blog post that it would rely on “editors and artists, not clicks and shares, to determine what’s important.” Discover has also prohibited fake and deceptive news outright and allowed only some publishers to produce stories each day, efforts that have attracted premium advertisers.

In contrast, Facebook users can share any article they wish, whether or not the material comes from reputable publications, and the company tries to rely on computers to decide who sees what content. That combination helped the platform become a place where fake and misleading news went viral during last year’s presidential election. Facebook has said it wants to curb this sort of behavior, but it still relies heavily on machines rather than human judgment to show people stories.

“What Snapchat did well is it curated a place where a publisher’s brand could live and it created an ad model that can pay,” said Troy Young, president of Hearst Digital Media. Hearst has six brands on Discover, including Cosmopolitan and Popular Mechanics, and is profitable on the platform.

Facebook did not return a request for comment.

Regardless of whether Discover bears fruit for all publishers, it is still likely to help Snap.

“For a generation of people, Snapchat is the place where they’re getting all of their news,” said Sarah Hofstetter, chief executive of the ad agency 360i. She added that Discover “helps Snapchat as it tries to be the next big online portal.”