Can Facebook’s “Watch” Become An Effective Competitor To YouTube?

As it consistently pushes video content on its platform, Facebook (NASDAQ:FB) recently launched a new subsection on its website for viewing video shows called “Watch”. This section will be rolled out on a pilot basis to select users in the U.S., and Facebook is looking to make it a go-to place for viewers to watch videos. While its platform already has a Video tab, Facebook is now looking to structure video content in the form of “shows,” or videos that follow certain themes or storylines. Further, the company will personalize watch lists for each user based on their likes and what their communities and/or friends are watching. Viewers will also be able to see comments, connect with friends and other viewers and become part of Facebook groups dedicated to a particular show. Facebook is looking to create a social experience around watching videos to engage its users better. “Watch” is also a platform for publishers to find an audience and build an engaged user base for their shows.  While this new platform appears to be fairly similar to YouTube, which has its own strong user base of 1.3 billion, Facebook’s approach to attract users is a bit different from that of YouTube. Facebook is targeting users with personalized recommendations based on their network’s viewing history, an approach which could help the company convert its existing users into a strong video audience.

See our complete analysis for Facebook here.

Personalized Recommendations, Engaged Audience Could Be An Advantage

Facebook is relying on personalized recommendations and a “what friends are watching” feature, to create a watch list for its video users. YouTube, on the other hand, has a strong “search” feature given its large library of videos, and gives recommendations based on past watch history. However, Facebook does have a competitive edge in attracting users, since it already has a large engaged user base of more than 2 billion. Users who go to Facebook for social networking can be directed towards videos through personalized recommendations such as “a video you might like”. On the other hand, since YouTube is a video-only platform, it engages users only if they intend to watch videos. Facebook is looking to move its users towards videos as they browse through their News Feeds, converting its existing users into a video audience.

Video is likely to make up 82% of all internet traffic by 2021 according to a Cisco forecast.  This has led to increased ad spend on social video, which is likely to be around $ 4 billion in 2017, increasing consistently in the coming years. As Facebook’s News Feed platform gets crowded, the company needs to explore alternative ways to retain a greater share of the digital advertising market. A dedicated subsection for videos, which will lure users from its main platform, appears to be lucrative solution. The company already has a publisher program in place to attract content creators towards this platform. However, competition from YouTube will be strong, and Facebook’s ability to create engaging video content and hook its users to “Watch” will be critical in driving advertising revenues.

Interactive Institutional Research (Powered by Trefis):

Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap |More Trefis Research