Snap investment is the latest in a series of bets on digital media that NBCUniversal has made

By Mathew Ingram
March 3, 2017

NBCUniversal has made a number of significant investments in digital media over the past year or so by buying stakes in companies like BuzzFeed and Vox. But on Thursday, it made what could be one of its biggest—and most risky—bets ever by buying shares in Snap Inc.

The Comcast subsidiary cmcsa spent a total of $500 million for a stake in the newly public video-messaging startup, an investment first disclosed by CNBC’s Andrew Ross Sorkin. Snap launched its hotly anticipated IPO this week, selling about 6% of the company to raise $3.4 billion.

Snap shares were in such demand (a number of sources said the initial offering was oversubscribed by a factor of 10) that the stock leaped by more than 40% in its first day of trading, closing at $24.50. That gave the five-year-old company a market value of more than $30 billion.

The purchase was just the latest in a series of investments NBCUniversal has made in new-media ventures. One of the first big ones was a $200-million investment in BuzzFeed that the company made in 2015, and it doubled down on that stake last year by investing another $200 million.

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NBCUniversal has also invested $200 million in Vox Media, which has a stable of sites including Vox, SB Nation, and Recode.

In a memo sent to NBC staff that was obtained by Recode, NBCUniversal CEO Steve Burke confirmed the investment in Snap, and said it was part of the company’s strategy to “drive digital growth for our business, both organically and through investments and acquisitions.” He also described it as another step in a “growing partnership” with Snap. The two companies worked together on the Rio Olympics.

The Snap snap investment could be the most controversial of these stakes, however, because the valuation being placed on the relatively young company is so massive. Based on its initial offering price, Snap was being valued at more than 50 times its current revenues, which is significantly more than Facebook fb was valued at when it first went public.

While Snap’s messaging service, Snapchat, has about 160 million daily users, some analysts say the service’s appeal is on the wane thanks in part to competition from Facebook’s Instagram app, which has duplicated a number of Snapchat’s features.

Taking stakes in digital media may be a smart hedge for NBCUniversal, as cord-cutting and other changes in consumer behavior thanks to the Internet start to eat into the company’s traditional hold on its audiences. But those investments also come with significant risk attached to them.

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