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Summary

On August 10, 2017, Facebook announced the launch of a new video service called Facebook Watch. The service aims to offer a more YouTube-like experience with professionally developed content alongside community-produced content. Internet video advertising revenue is expected to reach $49.5bn in 2021, up from $28.8bn in 2017. This means Watch will enable Facebook to grab an even bigger slice of the advertising pie.

Facebook Watch is a major improvement on the lackluster video tab

To grow advertising revenues, Facebook needs to increase the amount of premium video content available on the platform. Facebook Watch is the first step in achieving this. Facebook is funding original video content for the platform and offering a 45% revenue share to anyone willing to produce content exclusively for the service. Shows made exclusively for Facebook Watch include Tastemade's Kitchen Little, A&E's Bae or Bail, and Billboard's How It Went Down. Facebook also has a deal with Major League Baseball to show one game a week live.

Not only does Facebook need great content, but users need to be able to discover this content easily. Watch's discoverability features include the ability to browse by categories such as videos that are making people laugh (as judged by use of the "Haha" emoji) and videos that are generating the most comments. Users will also be able to see what their friends are watching and create a watch list which will automatically notify them when a new episode of their favorite show is released.

Facebook hopes to get viewers involved in shows by encouraging them to chat to each other as they watch and continue to interact after the show has ended. This modern reinterpretation of "watercooler talk" could be the icing on the cake for advertisers (i.e. engaged viewers of premium content). But how far can viewers successfully interact when they are all at different stages of consuming that content? And if these communities don't develop around content streams, will advertisers pay premium prices to advertise on the service?

Appendix

Further reading

Video Internet Advertising Forecast Report: 2016–21, ME0002-000748 (March 2017)

Digital Content and Services: Video Internet Advertising Forecast, 2016–21, ME0002-000730 (December 2016)

Author

Charlotte Palfrey, Senior Analyst, Digital Media

charlotte.palfrey@ovum.com

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