Hidden behind a 49% jump in its topline last quarter sits a do-or-die moment for Facebook – the social media company must develop a play in long-form video or risk its dominant position in mobile media. Facebook’s main product, its newsfeed, currently provides consumers with a tool to brush away the excess moments of the day. But its competitors are building out destination sites for longer video and threatening to pull audiences on mobile devices toward a product that Facebook doesn’t have.
For now, its strong position in short-form video continues to boost the company’s revenue. Facebook’s first-quarter ad revenue jumped 51% year over year despite increasing ad load by just 32%, pointing to a rising mix of video content and pricier video ads, although the signs point toward consumers spending more time with longer video.
The number of people watching long-form video on mobile is rising from an already significant base. According to 451 Research’s Voice of the Connected User Landscape Q4 2016 survey, 28% of people watch TV shows on their smartphone, up slightly from six months earlier, with 25% and 9%, respectively, saying they watch movies and sports on their smartphones. Few are doing so on Facebook, as barely one out of 10 cited Facebook Live as a source of video consumption, placing it behind YouTube by a factor of six and nearly a full percentage point behind Crackle.
In all likelihood, video consumption on Facebook outpaces Crackle, yet its low ranking in our surveys highlights that few people view Facebook as a destination for video, despite the copious amount of short clips and user-generated video on its app. The fight for longer video is intensifying fast. For proof, look no further than Amazon’s recent interception of NFL streaming rights from Twitter by paying 5x last year’s price, or the $6bn Netflix plans to spend this year on original content. Such outlays are causing a flood of TV-style programming on digital that’s likely to continue to attract audiences as the quality and amount of that content expands.
For its part, Facebook is pushing its way into this market through numerous product developments aimed at consumers, publishers and advertisers, including working with TV studios to develop content, launching an app for smart TVs and rolling out new video ad formats, such as ad breaks in Facebook Live. But it’s made its task all the more difficult by eroding trust among publishers with past measurement errors.
In some ways, Facebook’s current challenge resembles the shift to mobile that it successfully navigated in the months following its 2012 IPO – consumer attention then, as now, was moving to a new medium and Facebook had to keep pace. But in that first transformation, Facebook could rely on network effects to keep consumers in place while it built out mobile products. For this transition, Facebook will have to contort itself into a destination for active content consumption from the passive one it operates today.
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