Why Facebook Is Focusing On Live Sports
Reports suggest that Facebook’s (NASDAQ:FB) is in talks with Major League Baseball to live stream one game per week on its platform. Both Facebook and Twitter are looking at live sports as a key catalyst to drive user engagement, growth and eventually revenues. Last year, Twitter won the rights to broadcast the NFL’s Thursday Night Football games on its platform, and has been constantly looking for similar deals since. In broadcasting live sports, social media networks are combining viewing, gaming and real-time commentary on one platform. This can help improve engagement beyond the traditional linear experience, and could potentially bring a larger audiences to these events. Facebook is already looking to launch a TV app which will allow its users to watch videos from its platform on a big screen. This would be immensely useful for live sports, as users generally prefer to view these on a larger screen. Live sports could enable Facebook to connect better with younger audiences and improve user engagement significantly, driving advertising revenues. Below we discuss how Facebook could benefit from streaming live sporting events.
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Sports On Social Media Can Generate Higher Advertising Revenue
While Facebook is looking to create a social experience around live sports where fans can watch the games and comment live on its platform, sports leagues and sponsors can also benefit significantly from this trend. Streaming events live allows organizations such as the NFL to see exactly who is watching and commenting, allowing them to potentially engage better with fans on a more personal level. Meanwhile, sponsors can also be given real time specific details of viewership and engagement levels. With personalized data around viewers and real time analytics, sponsors may prefer social media for advertising to TV broadcasts.
According to our estimates, advertising on the core Facebook platform accounts for nearly 70% of the company’s valuation. Facebook indicated that it expects a slowdown in advertising revenue growth going forward. We expect the company’s average revenue per user from U.S. and Canada to grow steadily from $78 in 2017 to $125 by the end of our forecast period.
As these revenues grow at a slower rate, the company is looking to attract digital video advertisers as some marketers shift their advertising spend from TV to digital media. With its huge user base and personalized ad targeting features, Facebook is focusing on video to drive revenues. As it looks to acquire broadcasting rights to popular sports events with a TV app in the offing, we believe this strategy can bring the next wave of growth for the company.
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