Facebook's original content strategy may be facing a setback. Content owners providing content for Facebook's Watch are unhappy with the advertising revenue Facebook is being able to deliver them via the platform.
Facebook has stated several times that it sees video as a critical part of its strategy moving forward and launched Facebook Watch, an original content platform earlier this year. It has also partnered with several content creators to produce video content specifically aimed at Facebook users, i.e., short-form, mobile-first videos. The social network also wanted to emphasize community interaction around the video shows and formats it selected. Facebook subsidizes these shows and sells advertising slots on them, and then shares 45% of that advertising revenue with the producers.
Facebook also expects that other producers will also use the platform to create their own programming (which will not funded by Facebook itself) in return for a share of ad revenue.
However, according to recent reports, it appears that most producers are not happy with the resulting revenue today. The main point of contention appears to be mid-roll ads, which are sold directly by Facebook.
This follows reports last week suggesting that Facebook was shifting its original content strategy towards longer-form content, reducing the number of shows but upping the budgets for each one.
Content producers feel they would be able to do a better job selling advertising directly, as well as selling sponsorship deals for entire shows. However, Facebook's approach is tied to programmatically selling these ads based on user profiles, rather than direct sales by content owners based on their content and demographic appeal.
Facebook's 45% split is also lower than some of the other social networks out there: Snapchat offers a 50-50 split, while Twitter is giving up 70% of ad revenue to partners. (See Twitter Ramps Up Premium Video Content.)
And while producers have confidence in Facebook's ability to bring in the eyeballs and the revenue in time, few of these producers are large media corporations with deep enough pockets to last while Facebook sorts out its content partner strategy. Audiences for Facebook Watch are comparatively low at the moment, so the social network risks alienating content providers unless it can deliver them more revenue.
The social network is immensely powerful; the way Instagram has blown past Snapchat in the past year has proven that. (See Snapchat Misses Estimates, Eyes Reality Shows.)
But original content has always been an expensive business, and it has become more so with the emphasis (and investment) that OTT providers such as Netflix and Amazon have been giving it. There is intense competition for quality original content, across formats and platforms. Even with its extraordinary brand cachet, Facebook will have to accept it has to compete for the good stuff today, not the other way around.
— Aditya Kishore, Practice Leader, Video Transformation, Telco Transformation