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Investors have been fretting about Viacom Inc.'s cable TV fortunes and hoping the company will cook up new ways to profit in the digital economy. On Tuesday, as the media company reports quarterly results, it will have a new partnership to tout on that front.

The shiny new object: a deal with Snapchat Inc., the popular vanishing messages app that already carries content for Viacom-owned networks Comedy Central and MTV. Viacom and Snapchat are taking their deal a step further with a multiyear agreement that allows the media company to sell advertising on Snapchat's behalf.

For Snapchat, the move could help lure in more big advertisers to the millennial-focused platform. Viacom gets a chance to flex its ad sales muscles and direct some attention away from soft TV ratings, a sagging share price and drama related to the declining health of its 92-year-old controlling shareholder, Sumner Redstone.

With the MTV generation now in adulthood, Viacom is keen for any way to connect with the young viewers it has specialized in reaching.

Under the deal, Viacom will have exclusive third-party rights to directly sell advertising surrounding Snapchat's content. That includes pop-up "Live Stories" that cull together posts from users in specific geographic locations or during a holiday.

Viacom will also add two new channels to Snapchat's "Discover" page, where media outlets such as CNN, Vox, Mashable and The Wall Street Journal also have channels. MTV, which currently operates an international channel, will now get a U.S. version. Comedy Central, which produces a U.S. channel, will expand internationally. The company said it would further invest in making programming geared toward Snapchat.

"We had early on made a big commitment to developing premium, original content for the channels we had on the platform," said Viacom Chief Financial Officer Wade Davis. "Based on the success we had, we started talking about what we could do beyond that."

Viacom Chief Executive Philippe Dauman, who succeeded Mr. Redstone as executive chairman last week, will discuss the Snapchat deal during the earnings call Tuesday, a person familiar with the matter said.

Mr. Dauman has taken an unusually granular interest in Snapchat, leading the company's efforts to work with the upstart messaging app. Last fall, Mr. Dauman said he met with the app's CEO Evan Spiegel at the bar at Toscana Restaurant in Los Angeles. He got so involved in the creation of Comedy Central's icon on Snapchat that he weighed in on its color, suggesting it visually pop on the Discover page. It is the only green one.

The agreement comes as Snapchat tries to grow its revenue and expand its fledgling advertising business. Ad buyers say that while the app offers the potential to reach coveted young consumers, many marketers are hanging on the sidelines due to Snapchat's expensive prices and lack of ad sales organization.

"Since launching ads just over a year ago, Snapchat has continuously worked to strengthen its advertising team and product offerings, most recently restructuring the team," a Snapchat spokeswoman said.

An accord between Snapchat and Viacom may feel like a teenager letting his middle-aged dad tag along to the party because there is a better chance of scoring some booze. Viacom has long held relationships with the large ad buyers and brands that plunk down major dollars. Snapchat, though it boasts 7 billion video views a day, is a relative advertising newbie.

Marketers like General Electric Co., Coca-Cola Co. and Samsung Electronics Co. have advertised on the platform. In May, Snapchat raised more than $500 million in funding, valuing the startup at $16 billion.

"There's a lot of TV buyers that want to buy Snapchat more and more," said Imran Khan, chief strategy officer of Snapchat. Mr. Khan said that the company will continue to sell "basically most of our inventory," but that the Viacom deal "reduces friction" and lets big brands buy Snapchat ads as part of a larger TV package. Snapchat has a revenue-sharing agreement with Viacom for the ads it sells.

Jeff Lucas, Viacom's ad sales chief, said that both companies are targeting the same young viewers and are a "natural match."

"We identified early on the similarities in our audience with Snapchat as they were starting out. They realized early on about our access to the ad market in terms of selling against millennials," said Mr. Lucas, who advises Snapchat on advertising matters.

As the television industry struggles with falling ratings, Viacom has hawked a new data-focused product to better target viewers across its shows. Viacom's custom content hub "Velocity" has also fashioned ways to integrate brands into television programs.

The Snapchat deal allows Viacom to sell advertising on Discover for its own content and for that owned by Snapchat. Last year Snapchat abandoned its dedicated Snap Channel, but still posts its own content to Discover. Last month it debuted a new political campaign show called "Good Luck America." Viacom wouldn't sell ads on the Discover pages of other media companies, Snapchat said.

Keach Hagey contributed to this article.

Write to Steven Perlberg at steven.perlberg@wsj.com

(END) Dow Jones Newswires

February 08, 2016 23:05 ET (04:05 GMT)

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