PUBGY Publicis Groupe SA (QX)

By Suzanne Vranica, Maureen Farrell and Steven Perlberg 

As Snap Inc. woos Wall Street ahead of its initial public offering, the parent of the popular messaging app is also spending plenty of time courting another constituency: advertisers on Madison Avenue.

The Venice, Calif. company is in talks with the media-buying arms of several big advertising companies, including WPP PLC, Omnicom Group Inc., Publicis Groupe SA, and Interpublic Group of Cos., and is seeking ad-spending commitments of $100 million to $200 million for 2017 from each firm, according to people familiar with the discussions.

That would be roughly double or triple the amounts the ad companies spent last year. Snap is looking for yearlong and in some cases multiyear deals, the people say.

Such agreements typically are only a promise to spend a certain amount and aren't binding contracts, ad executives said. Still, securing the deals would give the five-year-old company a welcome boost as it pitches itself to public investors and tries to live up to a valuation that could be as much as $25 billion.

Wall Street will be looking for assurances that Snapchat's legion of young devotees -- it counts more than 150 million daily users -- will translate into a giant ad business. Snapchat sells vertical video ads that run in between content from media outlets such as Cosmopolitan, Vice, CNN and The Wall Street Journal, and specialized ads that brands use such as sponsored lenses and geo-filters. eMarketer estimates the company generated $367 million in ad revenue last year. This compares with Google's ad revenue of $63 billion and Twitter's $2.26 billion, according to eMarketer.

Snap's chief strategy officer, Imran Khan, has been the company's lead in its IPO process, given his background as a former head of internet banking at Credit Suisse Group AG. But in recent months he also has invested significant time in wooing ad executives, people familiar with the situation say.

His key lieutenant in that endeavor has been Jeff Lucas, a former executive at media giant Viacom Inc., owner of cable channels such as MTV and Comedy Central. Snap lured him last summer and made him global head of sales.

A well-liked executive with ties on Madison Avenue dating back decades, Mr. Lucas has relationships that could help the company attract the big prize it is seeking -- a piece of the roughly $70 billion that gets spent on U.S. television ads annually.

"Jeff is old school, he connects with our old-school ad guys and they control billions in TV ad spend," said one top ad executive.

The Snapchat executives took their ad pitch to the CES trade show in Las Vegas last month. Mr. Khan pitched a room full of Publicis executives and its clients, making the case for TV ad dollars by pointing to its huge base of users 18 to 34 years old, a coveted demographic in TV, people who attended the meeting say. He also had an intimate dinner at Aureole restaurant, with top executives from Publicis and Bank of America Corp., according to people familiar with the dinner.

Also at CES, Messrs. Khan and Lucas hosted a swanky dinner party at the Wynn Resorts' Fairway Villa to schmooze with senior executives from companies such as PepsiCo. Inc., Nestlé SA, Omnicom, BuzzFeed and Refinery29. Trevor Noah, host of Comedy Central's "The Daily Show," performed at the gathering.

To entice ad commitments, Mr. Lucas has promised discounts on ad prices, first looks at new products; and help with producing ad content tailored for its platform, some of the people familiar with the discussions said.

There is no guarantee Snap will line up the ad commitments it is seeking -- some ad executives say the asks are too high. One ad buyer said that his clients tend to think of Snapchat as a good way to promote a new movie release or product to hard-to-reach young audiences, but not a destination for year-round media buys like Facebook Inc., Alphabet Inc.'s Google or TV.

Some ad buyers say they hope Snapchat will continue improving its usage metrics. Sarah Hofstetter, CEO of digital agency 360i, said marketers want to know, "Did it work to build my brand? Did it work to sell my cookies?"

Snap has been ramping up its use of such metrics, recently signing a deal with Oracle Data Cloud to help marketers use data from offline purchases to target consumers with ads and measure the effectiveness of these campaigns.

Despite reservations, many ad firms expect to back the platform partly as a defensive move against Facebook and Google's dominance of digital advertising. WPP said it spent about $90 million on Snapchat last year, making it one of the platform's biggest customers. Other ad companies spent well under that amount, with one firm spending roughly $30 million, according to people familiar with the matter.

Mr. Lucas, who was hired last summer, spent the first few months of his tenure putting together his team, making hires from the TV world, agency business, and digital powerhouses Facebook and Google.

Before his arrival, Snap had some trouble on Madison Avenue. Initially, its strategy was to directly engage with big brands, a person familiar with the company's plans said. The company didn't build ties with ad agencies that control big media-buying budgets, leaving some agency executives feeling sidelined, some industry executives said.

Mr. Lucas knows how crucial it is to maintain cozy relationships with ad companies and marketers. During the Cannes Lions Ad festival in June, for example, when he was still working for Viacom, he helped secure a performance by rapper Flo Rida at a beach party hosted by ad-buying giant Omnicom Media Group.

Write to Suzanne Vranica at suzanne.vranica@wsj.com, Maureen Farrell at maureen.farrell@wsj.com and Steven Perlberg at steven.perlberg@wsj.com

(END) Dow Jones Newswires

January 25, 2017 05:44 ET (10:44 GMT)

Copyright (c) 2017 Dow Jones & Company, Inc.