Facebook Watch and the battle for digital TV dollars

Facebook’s announcement of its Watch video service is a clear bid to ramp up its ad revenue by tapping into the lucrative TV market. How will it affect digital ad spend, and what do marketers need to know?

Facebook’s newest feature, Watch, will host a range of original, TV-like content (both live and recorded), with the aim of combining the customizable nature of an online streaming service with the communal viewing experience provided by a social network. Initial partners will include NASA, Hearst, and BuzzFeed, with at least 40 more channels expected to be available within the next month.

Watch will be available on a separate tab within the Facebook interface on desktop, tablet, and mobile. Users will start to notice this over the coming weeks in the US, with international markets set to launch soon after.

This news will be no surprise to many industry observers, as Facebook is very conscious that it needs to tread a fine line between growing its ad revenues and maintaining an engaged user base. There is a clear sense that the social network needs to offer something new and attractive to keep users on site for longer; it is betting on Watch to provide that platform. However, there is still a lengthy list of unanswered questions for Facebook Watch before it becomes a go-to for TV viewing.

This article will cover what Facebook Watch is (and what it isn’t), before exploring the wider context that has made this announcement inevitable. Finally, we will assess the strengths and weaknesses of Facebook Watch when stacked up against its lengthy list of competitors.

What is Facebook Watch?

Watch is the next generation of the Video tab Facebook launched last year. It will host a wide range of content, but it is anticipated that Watch shows will aim for the middle-ground between YouTube videos and premium efforts from the likes of HBO and Netflix.

There will be a Discover section within Watch for each user, which will suggest shows based on their behavioral data and that of their friends. Users can save shows to their Watchlist too, while there are of course sections for trending and ‘most talked about’ content.

Although early shows will typically be between 5 to 10 minutes in length, the platform allows for videos of any length between 2 and 240 minutes. Early reports assert that Facebook’s primary aim is to host 20-30 minute video series, with the social network the sole owner of this content. There will be mid-roll ad breaks within these shows, opening an additional advertising revenue stream for Facebook and its partners.

All of this is backed by the level of funding one would expect of one of the world’s biggest companies; some producers claim that Facebook is offering between $10,000 and $25,000 per episode to gain highly valuable, original content from producers. For shows with a larger projected audience, that per episode fee will grow considerably.

Other partnerships have been secured with Group Nine Media, Mashable, and Vox Media, while some Major League Baseball games will be streamed live.

With Amazon rumored to be preparing a multi-billion dollar bid for English Premier League soccer rights, it would not be a shock to see Facebook secure a similarly noteworthy coup to get people on board with Watch. Although Facebook is not taking direct aim at Netflix or Amazon Prime for the moment, this may become a realistic proposition if it can gain a loyal viewership over the next 12-24 months.

How does Watch differ from existing Facebook videos?

Facebook has made no secret of the fact that it views video as a huge opportunity to keep its user base of over 2 billion people engaged, and to entice advertisers to invest heavily in the social network.

There are already a lot of publishers on Facebook, many of whom create original content solely for the platform. The growing number of publishers on Facebook has tested Mark Zuckerberg’s continued assertion that they are “a tech company, not a media company.” That line will likely soften in the coming months, as Facebook goes all-in on digital streaming services.

Facebook is clearly keen to maximize this format’s potential. One challenge, however, has been that brands are not creating assets that are optimal for viewing on a mobile device. Users typically scroll through their newsfeeds quite rapidly, stopping momentarily when their interest is piqued, but many videos do not do enough to retain their attention. In fact, 85% of Facebook videos are watched without sound.

Facebook partnered with MetrixLab recently to review the performance of videos across devices. As seen in the screenshot below, only 12% were adjudged to have performed well, with the majority falling under the ‘average’, ‘sub-optimal’, and ‘problematic’ categories.

Clearly, there is a disconnect between brands and users when it comes to Facebook video in its current iteration.

So how will Watch help to resolve these issues?

First of all, these videos will not interrupt newsfeeds by auto-playing, as many videos currently do. The aim of Watch will be to entice viewers to set aside time to catch up with their favorite shows, rather than hoping they will stop in the newsfeed for the duration.

Publishers can have content featured in newsfeeds if a user (or one of their friends) follows them, but these will likely be trailers for full episodes.

As an early collaborator, Quartz executive producer Solana Pyne, put it, “The main goal is not something that will catch their eye as they are scrolling through their feed, but to create things people will watch.”

Watch will also employ editors to curate watchlists, although much of this work will be done by artificial intelligence systems, much in the same way that Netflix recommends shows based on user preferences and viewing behavior.

Facebook has an even greater trove of historical data to feed into these systems, so this could become a significant competitive advantage for the social network.

As highlighted in the official announcement, Facebook will make great use of this data to create a more communal feel to its viewing experience:

“You’ll find sections like “Most Talked About,” which highlights shows that spark conversation, “What’s Making People Laugh,” which includes shows where many people have used the Haha reaction, and “What Friends Are Watching,” which helps you connect with friends about shows they too are following.”

Moreover, one of the main aims for Facebook Watch is to get users to tune in regularly for something approaching a traditional, lean-back TV experience. That is quite the shift for Facebook, and it will take some time for its growing user base to adapt. Facebook is approaching this quite gently, easing users in with videos that are typically between 5 and 10 minutes long, before branching out into more expansive shows.

It will also require users to interact with Facebook in a very different fashion. Up to now, it has been challenging to get users to pause and watch videos on the social network, as they are used to scrolling and stopping temporarily when their curiosity is piqued.

Why is Facebook getting involved with TV?

Facebook has become painfully aware of the dangers of over-saturating newsfeeds with too many ads. Their data team analyzes billions of user interactions to assess their behavioral patterns, with a keen eye on the point at which they get burnt out through over-exposure to ads.

The attention span of their collective user base is their greatest and most saleable asset, but it is difficult to maintain the growth that shareholders and advertisers want to see without adding new products. With over 2 billion users already, Facebook needs to get as much as possible out of existing users.

In theory, taking a slice of the TV market would go some way to providing a renewed sense of optimism about Facebook’s growth – particularly in highly-saturated markets like North America and Western Europe.

Source: Facebook and BI Intelligence

 

For some time, industry observers have predicted that digital ad spend will exceed the budget set aside for television advertising. This owes a great deal to the increases in time spent online across diverse demographic groups and territories and, although digital targeting and measurement are far from perfect, they are still an evolutionary leap ahead of traditional TV advertising methods.

As such, TV and Digital are converging in a number of ways. There are myriad options for digital-only TV streaming services, but digital advertising models are also being applied to linear TV advertising now too.

Programmatic TV buying has the potential to link digital and linear TV inventory purchases in an automated, highly-targeted, real-time auction. There is still some way to go before the industry delivers on its ambitious promises, but with Google and Facebook so heavily involved, we can expect a lot of improvement.

The growing number of “cord cutters” also opens up a potential audience for new, digital platforms. Cord cutters are typically people who are fed up with having to pay exorbitant fees to sign up for packages of TV channels they don’t want, just to get the few they do want.

At a time when consumers are accustomed to having control (or the illusion of control, at least), some cable companies appear outdated and out of sync with their audience.

In the US, the number of people without pay TV increased by 8.6 million from 2012 to 2016. The appetite for TV remains, but people want to experience TV shows in new ways. That’s where the likes of Facebook hope to step in and find a gap in the market.

Given how many people watch TV and talk about the show on social media already, bringing everything onto one platform seems a sensible progression.

So, the launch of Facebook Watch seems a perfectly logical one. The opportunity for Facebook looks clear; however, there are still many unanswered questions.

We would expect this of any nascent, ambitious technology, but this move into TV-like streaming poses quite a few more questions than we can provide answers to right now. For example:

  • Will users adapt their behavior to watch TV shows on a site they are used to browsing?
  • How will Facebook secure the sole rights to enough content to keep users engaged?
  • Who will be able to launch a channel? Will it be as open as YouTube, or more selective?
  • Will it be enough to land partnerships with networks? Netflix’s recruitment of Shonda Rhimes (producer of Scandal and Grey’s Anatomy) from NBC suggests that such partnerships are frail.
  • How well will ad targeting work? Delivering personalized messages during mid-roll ads will be a huge task, and not one we should believe will be without hiccups.

There is one question, however, that we can begin to answer already.

Who are the main competitors for Facebook Watch?

YouTube, first and foremost.

Google’s video streaming site has the in-built advantage of a large user base that is accustomed to watching longer videos on the platform. The recent launch of YouTube TV saw Google go head-to-head with other streaming sites like Sling and DIRECTV NOW to offer a live, cable TV experience without the baggage of a cable TV contract.

As an integral part of Google’s suite of digital products, which is tied together by their DoubleClick ad service, YouTube TV seems a direct competitor to Facebook Watch for those all-important ad budgets.

Nonetheless, YouTube TV is far from a complete package as things stand. In spite of some over-eager predictions that YouTube would usurp TV soon after launch, there is a long way to go before it can legitimately offer a better viewing experience. Without owning any of the TV content, it runs the risk that content producers will take their wares elsewhere too.

For example, Disney’s announcement that they are splitting from Netflix to launch their own streaming service (taking with it their range of TV channels including ESPN and ABC, along with a catalogue of much-loved movies) has demonstrated that no one immune to this threat. Netflix is adapting to fend off such challenges, but YouTube will need to do more than offer a cheaper, digital cable TV package to woo viewers en masse.

Twitter should also be wary of the challenges Watch brings. The former has dipped its toes into the world of live streaming with broadcasts of NFL and MLB games, hoping that viewers will prefer the combined benefit of a social network and live TV. Just as this proposition is starting to take hold, Twitter will likely be frustrated by Facebook’s plan to copy the premise.

Ultimately, Facebook is positioning Watch to occupy an appealing middle ground for advertisers: between the grassroots content of YouTube and the high-end productions of HBO (and the expensive ad slots they bring). With Apple set to invest $1 billion over the next 12 months in original content too, that premium end of the spectrum looks set to grow increasingly crowded.

 

What does Facebook Watch mean for brands?

Much of the above has been set in motion by the need to provide a new advertising alternative for brands. Longer shows will provide Facebook with the ideal opportunity to use its mid-roll ad format, in a similar fashion to traditional TV ads. This will hopefully bring with it some innovative new ways to engage with users, based on the quantity of data Facebook uses to feed its targeting algorithms.

There will also be opportunities for brands to create and launch their own content, or to sponsor content created by other producers. Having a space on Facebook dedicated to high-quality, long-form video content will likely encourage brand to think about producing their own video content, as opposed to investing time in multiple posts per day.

Overall, more time spent on site means more inventory for Facebook to sell, which will help to regulate prices for advertisers. This has been a constant struggle over the past 18 months, with prices rising as inventory stagnates and more advertisers get on board. Although Facebook has made multiple moves to ease the budgetary burden on advertisers, opening up an entirely new media format could be the most effective ploy yet.

Another probing question relates to who exactly would manage the ad budgets that will potentially be set aside for Facebook Watch. Should brands decide to invest in mid-roll ads during popular shows, it will be more expensive than standard prospecting or retargeting campaigns on Facebook.

This may continue the debate about whether campaigns of this type should be managed by a specialist digital marketing team, or seen as an extension of TV campaigns. These two worlds have been merging for some time now and these discussions started long ago, but these questions can still lead to organisational challenges for businesses.

If one thing should be clear, it is that Facebook is heavily invested in Watch and they want to help brands get value from these formats. The recent advice given to brands hoping to adapt their TV commercials for Facebook and Instagram provided further evidence of this collaborative approach.

Brands should therefore expect to view Facebook as an invaluable partner if they plan to launch on Watch; to say the benefits of a successful campaign would be mutual is an understatement.

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