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Straight Talk Media & Entertainment

Summary

With Apple and Google dominating the apps space, Facebook has been trying to persuade us that the future belongs not to apps, but to bots. This is odd because bots have been around since the 1990s and have so far failed to set the digital world alight. At the F8 event this week, Facebook seemed confident that the next generation of bots can open up a new opportunity for brands to interact with consumers, monetizing messaging where traditional advertising has failed. But is live video a better short-term way for Facebook to achieve revenue growth through advertising?

Bots are hot, but Facebook’s live video strategy is its biggest opportunity

So far, messaging platforms – or rather their users – have proven resistant to any form of advertising. Because they enable private communication, any attempts by third parties to butt in can persuade users to go elsewhere.

Apps such as WeChat, KakaoTalk, and Line gain significant revenue from allowing brands to market to their users and by enabling services such as payments. But chat apps that have significant user bases outside of Asia have been slower to engage with enterprises, partly because their users have a wider choice of channels. Facebook Messenger users might not remain loyal to the platform once it integrates marketing from third parties.

Brands are keen to find new ways of engaging with consumers via social and messaging platforms, especially since most of us are reluctant to use more than a handful of apps. The opportunity for messaging platforms to offer a richer user experience, beyond simple messaging, is significant. But brands seeking to insert themselves into a messaging platform face risks around not just user experience and privacy but also security and identity.

Communicating credibly with humans, without seeming creepy or intrusive, is also a significant challenge, even with the smartest bots. Faith in new AI technologies was dented by Microsoft’s disastrous experiment when it let “Tay” loose on Twitter. Intended to demonstrate the power of machine learning, Tay started to generate offensive tweets within hours of launch.

In the short term, a bigger growth opportunity for Facebook is live video. Facebook users spend three times as much time watching “live” videos on Facebook as they do watching on-demand video. They are more than 10 times more likely to comment on live videos than on regular ones.

With this kind of engagement opportunity on offer, Facebook is keen to establish itself as the go-to destination for live video. It aims to make live video consumption a natural habit for its users, just as it has done with regular video (100 million hours of which is watched on the platform every day). Monetization will only be possible once this is achieved.

In the longer term, Facebook’s sights are surely set on grabbing some of the many billions of dollars spent by advertisers on live TV (which are yet to migrate en masse to on-demand video platforms). It is not yet clear, however, if advertisers will follow viewers in adopting Facebook as a platform for live TV. Also, will Facebook primarily focus on videos from YouTube stars or videos from traditional providers such as Sky? Twitter recently invested $10m in NFL rights. Does this mean content owners have a new window to exploit, or will their current models be cannibalized?

Given YouTube’s anticipated expansion into the mobile live-streaming space (complete with its own standalone app), competition among platform owners to secure live content from leading publishers is set to accelerate in 2016. This will have big implications for viewers, platform providers, and content owners, as well as network providers. What impact will the mass adoption of live video on Facebook have on the networks that deliver it? Can network providers deliver video – including 360-degree and VR video – at scale to the quality that viewers (and advertisers) demand?

Appendix

Further reading

2016 Trends to Watch: Communications Services, TE0003-000894 (January 2016)

"Commerce is key to successful digital media offerings," ME0002-000660 (April 2016)

“Support for the use of Facebook Messenger in the contact center is growing,” IT0020-000181 (February 2016)

Author

Nick Thomas, Practice Leader, Digital Media

nick.thomas@ovum.com

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