Can Facebook Sustain Its High User Engagement Levels?
In its earnings call announcing Q1 2016 results, Facebook (NASDAQ:FB) reported that its global users spend 50 minutes a day on an average using its Facebook, Instagram and Messenger platforms. Usage of Whatsapp was excluded from this figure. This significant interval of the day is second only to the average amount of time people spend watching television and movies (2.8 hours), according to the Bureau of Labour Statistics. While Facebook attributed this high engagement level to the constant improvement of its ecosystem, the company plans to continue investment in development over the next five years to enhance products already being used by its users. We believe Facebook’s strong advertising revenues are driven by its user growth and engagement. The company works to increase both attibutes, adding features that might otherwaise draw users to alternative sites. Assuming the company success in this endeavor, Facebook should to be able to sustain high user engagement levels in future.
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Videos and Messenger Could Drive Engagement In Future
Facebook believes that social media is entering a golden age of online video and is taking several initiatives to tap into this trend. In addition to normal internet video, the company is focusing on interactive video experiences such as Facebook Live and 360 video, which simultaneously records all 360 degrees of a scene. The company believes that Live has a lot of potential, given its unfiltered and personal nature. Facebook is investing heavily in this market, as consumption of videos online increases significantly. (It is expected to grow by nearly 20% in 2016.) As of February this year, the time people spent on watching videos on the company’s Instagram platform increased by 40% compared to the preceding six months. Facebook is building on this momentum through its virtual reality initiatives and exploring the possibility of live video streaming. The company is also investing heavily to make Facebook Messenger a communication app between consumers and businesses. Recently, it launched “bots” to facilitate this communication, which is similar to its plans to use artificial intelligence to provide automated responses to commonly asked questions by consumers to businesses on Messenger. This can reduce latency and improve the response time of businesses. Even now, Facebook’s chat applications (Whatsapp and Messenger) together process 60 billion messages every day, which is three times the global volume of text messages. Using messenger for B2C communications should increase this volume significantly. Facebook’s goal is to make “Messenger” the one stop place for all users’ online requirements, from shopping to services and social interactions, and on to event planning. Its strategy is to increase user engagement on Messenger by providing features which will prompt users to stay on its platform for all their requirements.
We believe Facebook is investing in continued efforts to enhance features on its platforms, so as to avoid user fatigue and improve engagement. The company is looking at innovative techniques such as adding emojis to its like button, in addition to an enhanced focus on videos through Live and 360. We believe Facebook will be able to sustain high user engagement levels as it continues to work on innovative ways to attract and retain users.
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