Is Facebook The Future TV?

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Recently Facebook (NASDAQ:FB) announced that it is rolling out the ability to stream videos from its core platform to a TV screen using devices such as Apple TV or Google Chrome-cast. This feature will allow users to watch Facebook videos on large screens — addressing a big limitation of videos on social media. As the company continues to push video content on its platform, eyeing huge advertising spend on digital media, this feature should increase consumption of videos on Facebook. The younger generation is already moving away from traditional TV and towards streaming media.  So this feature can become popular among this audience, driving advertising revenue for Facebook. Given its huge user base and high engagement levels, Facebook has already reached the milestone of 100 million hours of daily video watch time on its platform, in a short span of time.  The company is now focusing on high quality, popular content on its platform, along with user generated content. It is collaborating with content creators and owners to get popular content on its platform. While Facebook might not be able to replace traditional TV, it can become an alternative streaming media and potentially the “go to” platform for video consumption for young users.

.See our complete analysis for Facebook

Users And Pages The New TV Channels

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Facebook is looking to develop a new kind of video platform where its users and pages could play the role of TV channels. The company’s Facebook Live feature allows users to broadcast events via its platform through live videos to their friends and make the videos public if they choose too. In order to improve the quality of video content on its platform and add more popular content, the company is partnering with agencies to broadcast content on its platform. It recently collaborated with UK TV channel Alibi to host its live action show “Framed” on Facebook Live. With personal and popular public content on its platform, as we see, Facebook users now have the ability to watch videos on a large TV screen as well as their smartphone, both to streaming videos or to check news feed updates .   Thus, Facebook can ensure high user engagement and attract more advertisers. According to eMarketer, by 2020 digital ad spending would account for nearly 45% of total media ad spending and TV’s share will drop to 33% (from 40% in 2014). As advertisers’ look to spend more on digital platforms, Facebook’s strategy to allow users to stream its videos on large screens can increase video consumption on its platform and enable it to grab a larger share in the total digital ad spend. According to our estimates, advertising on Facebook’s core platform accounts for nearly 70% of its valuation and we expect Facebook’s domestic average revenue per user to increase from $52 in 2016 to nearly $82 by the end of our forecast period.

Similarly we expect Facebook’s international average revenue per user to increase from $8 in 2016 to $18 by the end of our forecast period.

As the television industry faces challenges from alternative streaming media, social media platforms such as Facebook and Twitter can act as disrupters in this market. While Facebook might not be able to replace TV or other streaming alternatives such as Netflix, it can potentially become the go to platform for video consumption among the younger generation . With initiatives to increase video consumption on its platform and ensuring that high quality popular content is available to its users, Facebook can attract higher digital advertisers to its platform and drive revenues in the long term.

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