Facebook TV slashes smaller shows to free up budget for bigger productions
Facebook’s foray into the world of on-demand video isn’t yet ready to take on the big boys of the sector, like YouTube and Netflix. That’s because, in its effort to steal away TV viewership and carve out a larger slice of the advertising pie, Facebook is taking it slowly. In considering what kind of content its users would like to watch – and what will get them watching long enough to drum up significant ad revenue – the company is taking an experimental approach: a bit of this, a bit of that, see what performs better.
Facebook’s share price is up 53% year to date
SOURCE: Yahoo Finance
Facebook’s goal is simple, and sounds relatively understated when you first hear it: to get its user base to regard Facebook Watch – the platform’s official name – as an “entertainment destination”. It hopes that if it can engender this shift in perspective, it will tap into an enormous market (remember, it has more than 2 billion users) of viewers that can be monetized through the provision of video advertising. Video advertising is where the big bucks are going, as it’s the natural evolution from TV (long the industry’s medium of choice). Revenue the company gains from this gambit – if it succeeds – could outpace all of its other advertising initiatives.
But the first step is getting it right. That means no adverts and a mix of content to help effectively target viewers’ preferences. Four months after debut, the company is still working on that goal. Facebook’s vice president of product, Fidji Simo, said: “we’re a company that iterates a lot. We’re going to have to figure it out with partners.”
In a high stakes world with companies like Amazon investing heavily in producing top quality original content, this is a process that Facebook can’t rush. But the first results are in: quality matters. As a result, Facebook is shifting its focus. Smaller, more amateur, content is likely to go the way of the dodo, while the company reallocates its budget towards bigger productions. Looking at the spread of content on the platform, this seems like a good idea. The company has a captive audience that numbers in the billions – if it can hit the right creative blend to change that audience’s behavior just a little bit – a few minutes more video per day, perhaps – then the payoff could be enormous.
Dominion holds Facebook in its Global Trends Ecommerce Fund.
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