IBM Cloud Video - leaderboard - 11-8-17
  • Wall Street Presses Facebook on Video Plans, But End Game Remains Murky

    Facebook and other big platforms are facing lots of scrutiny about Russia’s meddling in the 2016 election. So on last week’s Q3 ’17 earnings call, CEO Mark Zuckerberg opened with a long statement about the investments the company is making in security and ad transparency. These investments will contribute to a 45%-60% increase in Facebook’s 2018 expenses.

    One might have expected that Wall Street analysts on the call would then focus their questions mainly on understanding these topics further and their impact to Facebook’s business. And while several did ask for details, 8 of the 11 analysts who asked questions instead focused on Facebook’s video strategy (which was the second main topic Zuckerberg discussed in his opening comments).

    Wall Street’s intense interest in Facebook’s video plans underscores how pivotal investors see video as a driver of Facebook’s continued massive growth and (depending on the answers to the first topic) how potentially disruptive Facebook could be for the rest of the video industry. All that’s for good reason: with over 2 billion monthly users and immense monetization capability, Facebook’s move into video is inevitably going to have significant ripple effects.

    But exactly where Facebook’s video investments will ultimately lead remains murky. After being asked multiple different ways about Facebook’s video plans, Zuckerberg finally conceded, “Well, I think the answer to that is we don’t know all the answers around what kinds of content are going to work and are not, so we will probably experiment with a number of different things.”

    That’s not to say he doesn’t have a vision of how he’d like to see video contribute to Facebook’s mission. In essence, Zuckerberg wants to use video to extend the core Facebook community experience: “We want the time people spend on Facebook to encourage meaningful social interaction. So we're going to focus our products on all the ways to build community around the videos that people share and watch. That's something Facebook can uniquely do.”

    Whereas last year live video seemed to be the company’s number one priority, now things seem to have shifted to users embedding video in various ways (Instagram Stories, WhatsApp, newsfeed, etc.) and to investing in original “lighthouse” video in Watch, about which Zuckerberg said: “Now in order to build that up, we think it makes sense to first invest in a bunch of lighthouse content, some that we may produce or some that we may license, to get to your question. We're pretty agnostic on how that goes. We just want to start the flywheel going, so that way there's content and communities that are there that support this use case of people coming to Facebook specifically to engage in that.”

    The WSJ reported in June that Facebook was willing to pay up to $3 million per episode for original content, though the company didn’t disclose any details last week.  

    But unlike Netflix, Amazon or Hulu, for example, which are investing billions annually for premium content that is mostly monetized through subscriptions, Zuckerberg has an alternative view: “the business here will primarily be through revenue shares of videos that normal creators and businesses put into the system rather than ones that we proactively go out and license ourselves.”

    In other words, Facebook is hoping that by jumpstarting original content in Watch and proving that it can generate viewership and monetization, creators will see it as a destination akin to YouTube where they must upload to build their audience.

    Facebook has all of the capabilities to execute video any way it ultimately chooses, but it will still be a long road to get anywhere close to the level of activity YouTube sees. Meanwhile, a video is worth a thousand words, so no doubt user-embedded videos in Facebook will continue to grow in popularity.

    All of this means Facebook’s video aspirations will be a work in progress for years to come. So expect many future earnings calls with many analysts trying to puzzle through this.

     
  • VertaMedia - full banner - 4-3-17

Sample