Video Remains Double-Edge Sword for Facebook

Facebook ended its most recent third-quarter (ended Sept. 30) fiscal period with 2.3 billion people worldwide using the social media platform monthly, including 1.5 billion every day. Revenue grew 33% to $13.7 billion.

Facebook Watch, the ad-supported VOD service, was launched Aug. 10, 2017, followed by Instagram TV (IGTV) this past June. Both platforms targeting YouTube continue to pose challenges to Facebook’s business model structured around user exposure to advertising. Indeed, streaming video could actually hurt revenue, Facebook founder/CEO Mark Zuckerberg said on the Oct. 30 webcast.

“Video monetizes significantly less well per minute than people interacting in [community] feeds,” Zuckerberg said. “So, this means that even though we’ve made video more community-oriented and minimized displacement of social interactions, as video grows it will still displace some other services where we’d probably make more money.”

In other words, as Facebook users consume video, they interact with “friends” less — and in turn deprive advertisers (which account for more than 90% of Facebook revenue) channels to pitch products and marketing campaigns.

“Video is a critical part of the future, it’s what our community wants, and as long as we can make it social, I think it will end up being a large part of our business as well,” said Zuckerberg.

Indeed, the executive admitted Facebook has had to “rate-limit” video growth on the platform. Characterizing video consumption as “passive” compared to users aggressively engaging in community, political and social conversations, Zuckerberg said Facebook Watch is working with advertisers to better fit their marketing and ad-buying process for video.

In Q3, Facebook introduced a way for advertisers to buy video ads from specific content categories and pay only for ads that are watched to the end.

“The biggest thing that we need to do is make sure that the video experience is people-centric, and that we’re helping content creators [and advertisers] build a community and we’re helping people interact with each other,” Zuckerberg said.  “We build social products that help people interact. There are lots of places in the world that you can go to consume content, but we’re the Internet service that people use to help connect with other people, and we’re not going to let passive consumption get in the way of that.

“We needed to figure out a way so that video can grow, but people can also keep on interacting and doing what they tell us that they uniquely want from Facebook,” he said.

Zuckerberg said Facebook Watch user growth has tripled in the past few months.

“I think that’s a very exciting opportunity ahead,” he said. “And that’s one of the reasons that I’m very optimistic about the Watch growth.”

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