Mark Zuckerberg lays out plan to turn Facebook into a video powerhouse

Facebook earnings call Mark Zuckerberg video ad revenue sharing
Facebook's headquarters in Menlo Park, California, on Oct. 29, 2015. Credit: Martyn Williams

During Facebook's recent earnings call, Mark Zuckerberg explained how the company can attract video creators the way YouTube has over the years.


If word choice predicts behavior, the world will soon be watching a lot more Facebook videos. During the Facebook earnings call last night, the word "video" was the fourth-most frequently spoken word, used 58 times. The frequency of the word "video" was only topped only by words even more vital to its business: "Facebook" 96 times, "people" 81 times, and "ads" 59 times.

Facebook founder and CEO Mark Zuckerberg revealed the company's new interest in media, when he said, "the third class of content, which I think is going to be important and increasingly important over time, is the one that you basically want to essentially trade the content for money."

Later, Zuckerberg said, "and we've recently rolled out the business model for this, which is for premium content; we'll give a revenue share on a portion of the views to the content owners. And we've got good feedback so far on that. We're working with a small set of partners to start."

Video creators promise to increase Facebook's advertising revenues in the same way they did for YouTube. The revenue-sharing business relationship resembles Facebook's Instant Articles, which increases the retrieval speed and responsiveness of media from publishers like the New York Times, the Washington Post, and Buzzfeed, which upload content directly into Facebook in return for a share of the advertising revenues that the content produces.

Video has been really important to Facebook in many different ways. For a long time, users' video content, mostly captured on smartphones, has complemented photos in the Facebook newsfeed. In August 2014, Facebook introduced Hyperlapse, which compresses video into short stories to drive user engagement and compete for users' attention, competing with short-video apps like Snapchat. Paid video ads have been recognized to be very effective, because more than 40% of the ads are watched from start to finish and the ads can be very granularly targeted with fine-tuned Facebook demographics. And as a precursor to video's evolution into virtual reality, Facebook recently introduced 360-degree video support that will become increasingly popular as virtual reality headsets become more commonplace.

This latest move is targeted right at YouTube, intended to siphon off some of the shared advertising revenues generated by YouTube's top artists, such as chef Rosanna Pansino, who earned $2.5 million, violinist Lindsey Stirling, who earned $6 million, and comedians Rhett and Link, who earned $4.5 million last year.

Instant Articles required a change to Facebook's algorithm for governing how the newsfeed is populated. Facebook constrains the flood of user posts based on privacy settings and analysis of user content preferences to restrict newsfeed posts to those that match a particular user's likes and other indications of user content interest. With this new revenue-sharing video type, Facebook will change its role to become the video artists' advertiser, using fine-grained data and analytic tools to decide which users' newsfeeds are the most promising on which to promote a video, yielding subscriptions and regular viewing, and, of course, advertising revenue.

The role of video advertiser and investor isn't new. YouTube has used its analytic prowess to identify trending video artists and promote them. Two years ago, YouTube announced YouTube Spaces, incubators for promising talent where video artists could gain free access to studios, expensive recording equipment, and technicians. YouTube Spaces can now be found in seven cities around the world.

Facebook isn't yet ready to compete with Netflix, Hulu, or even YouTube Red. During the earnings call, Zuckerberg responded to a question about Facebook's interest in long-form content by saying, "the more natural starting point for us is shorter-form content which can either be social content or premium short-form content."

He was, however, careful not to rule out long-form content at some point in the future. If Facebook becomes a top-level index for discovering video like cable television is now and iTunes and Google Play want to be, it can become the next television. But for now, Zuckerberg is focused on monetizing short-content and paying video artists for being on Facebook.

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