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What Impact Will Facebook Have on the Future of TV and Video Markets?

by Brice Longnos | Aug 08, 2017

Since the end of 2013 Facebook has become a significant platform for sharing and distributing video content for its users and media companies and brands.  To date Facebook has successfully leveraged its massive user base to clock up some impressive viewing statistics  – such as 8 billion average daily video views from 500 million users in November 2015 (expected to go past 64 billion this August 2017), with one in five videos being a live stream.

The next step in Facebook’s video strategy is investing and developing its own programming, which raises some significant questions for other video content distributors, such as YouTube, Snapchat, Netflix, and traditional video distribution channels; that are all competing in the increasingly crowded OTT digital video market, which we estimate will approach $85 Billion by 2021:

  • What type of content will Facebook focus on to fit its broad user base?
  • What form will the format take given the strong skew toward use on mobile devices?
  • Which business model(s) is Facebook going to launch with?  
  • Will it launch in the US only, or does it plan to go global?
  • What features will Facebook leverage to encourage users?
  • Will mixing UGC video with professional video provide sufficient scale and appeal for consumers and advertisers?

We have some clues so far. Indications given by David Wehner, CFO of Facebook, are that the videos on its separate Video tab – named Watch - would likely be monetized through advertising, with short mid-roll ad breaks. Facebook’s closest competitors have opted for different approaches, with YouTube Red being subscription-based and Snapchat Discover ad-funded. To justify mid-roll ads, though, I would expect longer-form content is needed; and this seems where Facebook resources are being invested at the moment. It has invested in high-end series such as Sundance relationship drama Strangers, game show called Last State Standing and MTV comedy series Loosely Exactly Nicole. However, such investment seems to be confined to “kick-starting an ecosystem for longer-form content”, in other words providing a test to leverage some insights to further convince content producers and providers. At the same time, compelling content will drive further eyeballs and user insights which will lead to increased ad revenue potential. In this environment we expect live shows and live events to take a particular place, as reminded by Facebook’s acquisition of the rights for the Major League Baseball (MLB).

Sheryl Sandberg , COO, highlighted Facebook’s edge in terms of personalization  leveraging connections, conversations, and communities around video. Content discovery is therefore expected to be powered by the insights from sections in Watch labelled ‘Most Talked About’, ‘What’s Making People Laugh’ and ‘What Friends Are Watching.’ This would match media owners’ current interest in social media platforms to improve targeting, reach and engagement, which we recently assessed in the case of Snapchat. We certainly expect Facebook’s additional layer of user insights versus YouTube and Facebook’s 2.01 billion monthly user base versus Snapchat to present sufficient threats to both Snapchat and YouTube in a relative short term. In the longer term, Facebook may have broader ambitions to target subscription-based players like Netflix, YouTube Red, or Amazon. Facebook’s desktop revenue has been fairly flat versus mobile. So, video creates a hook for greater desktop engagement and potentially breathes life back to its desktop property, and provides a better fitting use case for its Facebook TV app. Regardless, Facebook will test launch the service in the U.S. before rolling out to all users and then more countries worldwide.

Battles in the new TV and video landscape will continue to rage on and almost certainly increase in complexity. Strategy Analytics’ Media Strategies Group will continue to track the evolving TV and video market, including monitoring the progress of Facebook Watch and its impact on the video ecosystem.
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