Even as millennials cut the cord and flock to streaming services, the world's leading social network, built on their usage, is working on a plan to get its services to the TV.
According to a report in The Wall Street Journal, Facebook is now developing an app aimed at the Apple TV set-top box for delivering new video services to the TV set. Its goal is to push its video-centric strategy, but also to create new opportunities for video advertising and ad revenue.
Facebook has been increasingly focused on video, with various executives (including founder and CEO Mark Zuckerberg) predicting that the social network would be "mostly" video in coming years. (See Social Video Could Be the Next Great Challenge for Network Operators.)
One of the key drivers for Facebook's video push is that it is running out of inventory. The company warned analysts during its Q3 2016 earnings report that its "ad load could come down meaningfully" in mid-2017 because it was simply running out of places it could place ads in Facebook newsfeeds. The stock dropped 7% on its guidance, despite the company adding more users and posting higher revenues than expected ($7.01 billion compared to estimates of $6.92 billion).
The push towards video is designed in part to create new inventory for the social media giant. It's also a result of technology development, with mobile networks now able to support social video delivery, according to the company.
And Facebook isn't just looking at social live streams, though that is an important part of its strategy. Apparently the social network is also in talks to acquire long-form content. In an earlier statement to Recode, Facebook's head of global creative strategy, Ricky Van Veen, said: "Earlier this year, we started rolling out the Video tab, a dedicated place for video on Facebook. Our goal is to kickstart an ecosystem of partner content for the tab, so we're exploring funding some seed video content, including original and licensed scripted, unscripted, and sports content, that takes advantage of mobile and the social interaction unique to Facebook. Our goal is to show people what is possible on the platform and learn as we continue to work with video partners around the world."
Another important area that Facebook has mentioned in the past is companion-screen advertising, i.e., using the mobile device to deliver advertising content synchronized with, or relevant to, the TV content being viewed. This has been an area of experimentation for advertisers for about 15 years, and success has been mixed. But Facebook believes it can do better than anyone has in the past.
Its Q4 2016 results certainly suggest this is the case: Facebook released its quarterly earnings yesterday and reported 1.146 billion daily mobile active users. It grew its ad revenues by 53% for the quarter, beating analyst estimates for revenues, earnings per share and new users.
Facebook's plans to get to the TV underscore the importance it still has for a media company. Even millennials spend time watching TV, even if this is declining and already less than older segments. And the TV still dominates daily time spent with media overall. However, the definition of TV will increasingly become clouded, as skinny bundles and streaming services to set-top boxes complicate our ability to define "TV viewing."
The key to Facebook's success here is to develop newer, shorter, different kinds of video genres that can work across platforms and are clearly differentiated from more traditional programming. Licensing or producing high-value content such as TV dramas and comedies just adds one more member to an already expensive arms race.
— Aditya Kishore, Practice Leader, Video Transformation, Telco Transformation