How Snapchat's Monetization Deal With Amazon Could Boost Its IPO

Amazon.com, Inc. AMZN has found a new way to promote its brand: by using social media sites that most retailers ignore.

The dot-com retail giant already made headlines when it allowed Twitter Inc users to shop by replying to tweets. Now Amazon will send quick, exclusive deals via Snapchat.

According to CNET, Amazon will use Snapchat to send "gift ideas, recommendations and exclusive deals that disappear in seconds."

Needham analyst Kerry Rice thinks the deal is a win for both Amazon and Snapchat.

"I think they use every avenue possible to reach customers, [but] it will be immaterial to contribution to the top line and the bottom line," Rice told Benzinga, referring to how Amazon may benefit.

As far Snapchat, Rice said that it is "always good to have a leading e-commerce company endorse or work with you and kind of endorse your product."

Related Link: 5 Ways Amazon Is Prepping For The Holiday Shopping Season

IPO Potential

Snapchat has not said if and when it will go public, but the company recently authorized more shares, which could allow other companies to get a piece of the firm before an IPO.

Rob Enderle, principal analyst at Enderle Group, thinks the Amazon deal could be just what the firm needs to survive before its public offering.

"It depends on how well it works," Enderle told Benzinga. "Amazon is clearly using a method to draw attention to them and hopefully draw people to the Amazon site in Snapchat. If this works out, then Snapchat will have a decent revenue source that they can use [until] their IPO."

Despite the deal, Enderle still thinks Snapchat was "insane" to turn down the rumored buyout offers from Facebook Inc and Google Inc.

"That was happening at a time when companies were pretty much paying anything for anything," said Enderle. "Clearly we're not in that market anymore. The billions of dollars that they might have gotten from one of the other players may not come to them in IPO because the market is also softening against products like this. It's a gamble for them. But the Amazon thing strengthens their position -- if it works -- and really kind of puts an emphasis on the fact that they can generate money."

Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.