Facebook is moving into short-form, professional video with Watch. It is a latecomer to the field, following similar moves by rivals such as Twitter, Snap, Spotify and Reddit. But Facebook could still wind up being a big winner.
More than 30 partners, including A&E, Hearst, and MLB, will produce content for Watch, which began appearing as a tab for some U.S. users on Thursday. Over time, the company expects the offering to grow to hundreds, and possibly thousands, of shows.
It’s hard to overstate how huge video is on Facebook. The social network ranks second only to YouTube for internet video. Earlier this year, Facebook CEO Mark Zuckerberg called video a “megatrend” and described the platform’s “video-first” strategy. Outside of YouTube, Facebook has the most robust data on users’ viewing habits: it knows what kinds of videos people watch, how long they watch them, and why. Which is why it makes a lot of sense for Facebook to leverage this data and launch a slate of premium shows.
“The company has a lot going for it in building this platform,” says eMarketer senior analyst Paul Verna. “It has been adding video in many ways to its platform for a while now, and if I were YouTube, I would be more worried about Facebook than other competitors out there.”
Shows on Watch, which can be live or recorded, follow a theme or a storyline. Partners producing the shows earn 55 percent of revenue, while Facebook takes a 45 percent cut. Facebook says it funded a small percentage of the initial shows, but hopes to open up the platform to creators over time and help them make money through revenue sharing. Categories like “Most Talked About” and “What’s Making People Laugh” help a viewer navigate to content they’re most interested in.
Watch starts with another huge asset: the more than two billion people who visit Facebook at least once a month. By comparison, YouTube claims 1.5 billion monthly active users. “In terms of sheer volume, Facebook appears to be winning the digital eyeballs game,” says Glenn Hower, a senior digital media analyst with research firm Parks Associates. And it’s collecting data on every user to reap ad revenue, to great effect: the company posted $9.16 billion in ad revenue for the second quarter. (Facebook does not break out how much came from video advertising.)
That said, Facebook faces significant obstacles. It’s struggling with the unpredictability of live video, with many controversial, and sometimes violent, videos appearing on the site. Competition is fierce, too: Twitter recently revealed partnerships with sports leagues, entertainment channels, and digital-media companies including The Verge and BuzzFeed News. YouTube has taken a swipe at cable with its recently-launched “skinny bundle” service, YouTube TV.
So far, Facebook’s slate of original video offerings, from one MLB game a week to a cooking show in partnership with Tastemade, looks much like what’s already out there. “It lets Facebook dip its toes into the pool,” says Verna. “With so much competition in medium-length video, it makes it harder for someone like Facebook to swoop in. There isn’t really an opportunity to turn the ship quickly.”
Complicating matters is the perception of Facebook as a place not just to connect with your friends, but where your parents and grandparents socialize with you, Verna points out. “If part of this move is hoping to attract millennials, Facebook may be at a disadvantage to, say, YouTube,” Verna says, though he says the popularity of Facebook-owned Instagram with younger users somewhat mitigates that problem.
The bottom line, however, is that more than any other company, Facebook knows how to leverage data on users to generate revenue. This video initiative, while experimental for now, is likely to follow that same pattern.
Moreover, the future of digital advertising, especially in video, is not a zero-sum game says Verna. “There’s enough video programming to go around that I could see, three or five years from now, each platform with its own unique and exclusive content.” YouTube could continue down its path of pursuing subscriptions, while Facebook will likely remain predominantly ad-based, Verna predicts. “But both of them would be leading players.” This doesn’t mean Facebook takes the video crown from YouTube, necessarily, but it could don a crown of its own.