Snap Wants to Compete With Facebook as a Source for News

Snap is in talks with media companies to create a dedicated news tab in Snapchat.

| More on:
Person Hands Opening Mailbox To Remove Newspaper

Image source: Getty Images

Snapchat isn’t exactly a reliable source of hard-hitting news, but parent company Snap (NYSE: SNAP) reportedly wants to change that. The disappearing-message company is in talks with media companies to develop content for a dedicated news tab on Snapchat, separate from the existing Discover tab, according to a report from The Information. Discover is chock-full of celebrity gossip and entertainment videos, but not the kind of news people consider “news.”

Facebook (NASDAQ: FB), meanwhile, is working to court publishers to its dedicated tab, which it plans to hold up as a source for “trustworthy news.” About two-thirds of Americans already get their news from social media, according to a Pew Research poll from last year. Facebook is by far the most popular social media source; 43% of all Americans use it to get news. Just 5% use Snapchat for news.

Facebook is reportedly struggling to get big-name publishers onboard with its plans, but Snap may have better success due to the demographics of its audience.

The Snapchat logo.

Image source: Snap.

Why Facebook’s having trouble

Facebook’s offering publishers up to $3 million for the rights to republish articles in its dedicated news section. That amount could be a big deal to a small publisher of a local newspaper. Facebook will help smaller publications reach a broader audience and pay them for the privilege, no less. What’s more, Facebook’s efforts may give publishers more leverage to get other tech companies looking to get into news distribution, like Apple, to pay up, as well.

For a big national news publisher, however, the deal isn’t as sweet. First of all, the dollar amount isn’t as significant to a bigger company. Second of all, the marginal gain over not participating in Facebook’s news section isn’t as significant for a well-known brand. Additionally, the publisher would be ceding some control of its brand to Facebook, which will be able to place content from a national publisher next to any other content in the ecosystem. Big publishers had similar objections to Apple’s new distribution services, Apple TV Channels and Apple News+.

Snap doesn’t provide any panacea for those same challenges. It does, however, open the door to an audience that’s often harder to reach and less easily monetized through subscriptions — i.e., young people. That may make certain sacrifices worth it for the bigger publishers pushing back against Facebook.

Group calling on Snapchat

Image source: Snap.

Younger people have shown an interest in more mainstream news when it’s packaged differently from the nightly half hour on local broadcast television. Snapchat provides a suitable distribution platform for the snackable video news content they most prefer.

Can Snap actually pull this off?

While Snap may have a stronger pitch to media companies than Facebook, thanks to its relative audience, it’s proven quite incapable of changing its users’ behaviors. (Remember, just 5% of Americans presently get news from Snapchat.) The app redesign last year that intended to “separate the social from the media” mostly succeeded in separating users from Snapchat.

Many of Snap’s Discover partners were hurt by the redesign. That said, Snap has had a lot of success recently with Snap Originals, which continue to see increased viewership.

Snap may want news publishers to create new content specifically for Snapchat like Snap Originals. That would have a greater chance of attracting an audience but also cost a considerable amount more for Snap upfront. Snap is paying between $40,000 and $50,000 per episode of Snap Originals. That’s relatively manageable when each series has around 10 episodes. News content comes out every day, multiple times per day, and it doesn’t have the same watchability just a few days after its release.

And while Facebook can easily give $100 million to a few dozen news publishers for an experimental news section, that kind of money is harder to come by at Snap. The company’s free cash flow came in at negative $103 million last quarter, compared to $4.8 billion at Facebook.

Getting all the ingredients together to succeed with a dedicated news tab is a bigger challenge for Snap than simply attracting media companies to publish their content on the platform. On the other hand, if Facebook can sign a few big-name publishers to its dedicated news tab, it’s well-positioned to get users to engage more on the platform by offering both better news content and a better user experience than most digital news readers are used to.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Adam Levy owns shares of Apple and Facebook. The Motley Fool owns shares of and recommends Apple and Facebook. The Motley Fool has the following options: short January 2020 $155 calls on Apple, long January 2020 $150 calls on Apple, short January 2020 $155 calls on Apple, and long January 2020 $150 calls on Apple. The Motley Fool has a disclosure policy.

More on Tech Stocks

A data center engineer works on a laptop at a server farm.
Tech Stocks

Invest in Tomorrow: Why This Tech Stock Could Be the Next Big Thing

A pure player in Canada’s tech sector, minus the AI hype, could be the “next big thing.”

Read more »

grow dividends
Tech Stocks

Celestica Stock Is up 62% in 2024 Alone, and an Earnings Pop Could Bring Even More

Celestica (TSX:CLS) stock is up an incredible 280% in the last year. But more could be coming when the stock…

Read more »

Businessman holding AI cloud
Tech Stocks

Stealth AI: 1 Unexpected Stock to Win With Artificial Intelligence

Thomson Reuters (TSX:TRI) stock isn't widely-known for its generative AI prowess, but don't count it out quite yet.

Read more »

Shopping and e-commerce
Tech Stocks

Missed Out on Nvidia? My Best AI Stock to Buy and Hold

Nvidia (NASDAQ:NVDA) stock isn't the only wonderful growth stock to hold for the next 10 years and beyond.

Read more »

IMAGE OF A NOTEBOOK WITH TFSA WRITTEN ON IT
Tech Stocks

The Ultimate Growth Stocks to Buy With $7,000 Right Now

These two top Canadian stocks have massive growth potential, making them two of the best to buy for your TFSA…

Read more »

A shopper makes purchases from an online store.
Tech Stocks

Down 21%, Is Shopify Stock a Buy on the TSX Today?

Shopify (TSX:SHOP) stock certainly rose in 2023 but is now down 21% from 52-week highs. So, is it a buy…

Read more »

Man holding magnifying glass over a document
Tech Stocks

Lightspeed Stock Could Be Turning a Corner

Lightspeed Commerce (TSX:LSPD) is making strides towards operating profitability.

Read more »

Retirement plan
Tech Stocks

Want $1 Million in Retirement? Invest $15,000 in These 3 Stocks

All you need are these three Canadian stocks to build a million-dollar portfolio.

Read more »