What’s New with Facebook Video?

With approximately $5.6 billion in revenue in 2013, YouTube is the clear leader in the digital video space. Yet Facebook, which only began testing its video ad product in 2013, might actually have a better strategic positioning than its San Bruno rival. The reason comes down to its relationship with publishers. Facebook, unlike YouTube, drives a huge percentage of traffic to publishers like BuzzFeed, The New York Times and The Huffington Post. So as Facebook ramps up its video efforts, it shouldn’t be too difficult to get publishers to create video content exclusively for Facebook.

YouTube already tried this through its original channel initiative in 2011 when it paid publishers like the Wall Street Journal and Slate to produce exclusive content for the video platform. However, YouTube was forced to abandon the initiative when publishers backed out, realizing that distributing video on their own platforms would be more lucrative. For Facebook, the situation is vastly different because it has something that YouTube never did: leverage.

Naturally, publishers feel like they are stuck between a rock and a hard place. They fear that once they publish content directly to Facebook, they will become even more dependent on the platform, which can generate as much as 40% of their viewers. What’s more, publishers fear losing control over the valuable data that they collect about users that visit their sites. On the other hand, they worry that if they don’t publish directly to Facebook, a small change to the news feed algorithm could starve them of traffic, the lifeline of their business. In many ways, the current relationship between Facebook and publishers is analogous to the relationship between Amazon and book publishers…minus the acrimony.

Facebook has already started to turn up the heat on publishers. Its autoplay feature, which allows video to automatically play when a user scrolls over it, only works with videos published using its native video tool. That means that a YouTube video posted to Facebook will only play if it is clicked. This might sound minor, but at the scale of a billion plus users, it can have a huge impact. What’s more, Facebook has begun courting homegrown YouTube stars, offering them better terms for revenue sharing from advertising. Some, like the Young Turks, a news show, now post video on both platforms.

Right now, Facebook’s biggest unknown is how it plans to monetize video from publishers. In 2014 it introduced a new video product, allowing advertisers to run promoted video in users’ news feeds. In general, advertises love the new product because it leads to great engagement rates. The video ads also feature a “call to action” option, which helps advertisers bridge the gap between brand advertising and demand generation.

For both Facebook and advertisers these ads are great, but they don’t excite publishers because they don’t generate any revenue for them. For publishers, the simplest way to monetize digital video is through in-stream ads that appear before, in the middle and after a video. Facebook has explicitly said that it will not feature in-stream ads before videos (pre-roll) because it wants to protect the integrity of the news feed. However, it has experimented with post-roll ads, which appear after a video plays. The best example of this is the partnership Facebook struck with the NFL to distribute video content on the social network. While these types of content partnerships with post-roll ads may become more common, it seems hard to believe that they would be the centerpiece of Facebook’s video monetization strategy.

So how does Facebook plan to make money off of video? One possibility involves helping publishers create branded content to run on the platform. In this scenario, Facebook would facilitate relationships between brands and publishers, taking a cut for brokering the relationship and distributing the content. By building up The Creative Shop, its in-house ad agency, Facebook could even help develop and produce the content. The downside of this model is that it is labor-intensive and difficult to scale.

Another possibility involves creating a stand alone video product similar to Messenger which is both independent yet connected to the Facebook application. This video product might be similar to Snapchat’s Discover, which features content from premium publishers with subtle, non-intrusive advertising. The challenge of this new video product is coming up with a way to integrate it into the existing experience in a way that feels natural and seamless.

Tomorrow, Facebook will host F8, its developer conference at the Fort Mason Center in San Francisco. Expect to hear major announcements about video. The 1 PM session is called, “What’s New with Facebook Video.” The word on the street is that Facebook has approached a number of big publishers about putting news and video directly on the social networking platform in exchange for a share of ad revenue. Already, the Facebook timeline is overwhelmingly populated with video, with 3 billion video plays per day. Very soon, there could be a whole lot more.

Originally published at www.linkedin.com on March 25, 2015.

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