Facebook Isn't Making Enough Money?

Is Facebook getting too greedy? Maybe. But maybe they just took one of the first steps to becoming an unbeatable entertainment powerhouse.

Recode is reporting that the social network is planning to start inserting ads in Facebook videos, what is termed “mid-roll” advertising. The planned ad split with YouTube mirrors the deal offered currently by YouTube: video publishers will get 55% of the money, and Facebook will sell the ads.

We don’t doubt that this will prove lucrative for Facebook, and it’s interesting because Facebook has combated ad blocking more forcefully than its competitors. While this new obtrusive video format would seem to be begging for more action from AdBlock Plus, Facebook will have anticipated that move.

We also don’t doubt that this will prove highly unpopular with Facebook users. As a daily viewer of YouTube, I know that it can be highly irritating to see the same ads over and over while watching videos. The temptation to reach for ad-blocking software is intense. Currently, an inane spot for a Jacksonville, Fla., plumber firm called Metro Rooter plays over and over when I stream. The jingle is really catchy, maddeningly so.



As Facebook isn’t commenting on this plan, we aren’t sure how the ad insertion will work. If this is phase one of Facebook moving towards being more of an entertainment venue, I think that’s interesting. There are, of course, many dozens of such entertainment outlets, such as Netflix, that dominate now. There is only one Facebook, and it is the unique networking-enabling characteristic of it that makes it stand out. But when you allow film and TV companies to put ad-supported movies and TV shows on Facebook, it will change the nature of what Facebook is.

We note that Facebook won an Emmy last year for its visual animated short film, “Henry.” Perhaps that is going to Mark Zuckerberg’s head, and he sees himself up on the podium accepting an Oscar. For someone like Zuckerberg, who has seen every possible success, what’s left? With YouTube courting Conan O’Brien, it is already headed in this direction. Et tu, Mark?

Recode’s Peter Kafka states that this effort “could represent the first chance many video publishers have had to make real money from the stuff they’ve been running on Facebook.” Exactly. Real money. These are the keywords here. Let’s consider the numbers.

With almost two billion monthly active users, Facebook has the biggest and most committed audience of any possible entertainment venue. With one stroke, it could have the largest audience for a film or TV show anywhere. By adding advertisements to video material, there will be a huge temptation for Facebook to move in this direction, as nothing will monetize it more. Facebook users already watch 100 million hours of TV/video a day. No wonder it wants to aggressively monetize this huge traffic.

TV and movie studios should think about this before they commit deeply to Facebook in this regard. Facebook is not like cable. Notwithstanding the fact that a few companies like AT&T dominate, cable is distributed by many different companies. Facebook is a law unto itself. If entertainment companies flock to Facebook, it may end up being way more powerful than it is now — which is scary.

Facebook is in great position, however, especially when it comes to combating ad blocking. “Facebook’s recent workaround for Adblock Plus and other ad blockers is already earning it money,” TechCrunch reported in November. “On today’s blockbuster Q3 earnings call, the company said desktop ad revenue grew 18% year-over-year this quarter compared to around 9% in previous quarters, and that thwarting ad blockers was largely the cause for that boost.”

With that kind of wind at its sails, Facebook is on target to become a huge entertainment venue. In December, Variety reported that “Facebook is embarking on a plan to bring exclusive entertainment content to its platform, saying it will fund and license original programming spanning a range of formats — including scripted and unscripted shows — from media companies and individual digital stars. The initiative is being headed up by Ricky Van Veen, Facebook’s head of global creative strategy, who joined the social giant earlier this year from CollegeHumor.” 

Ten years from now, revisit this column and let me know if I was right in predicting that Facebook will become a huge entertainment platform, bigger than the movie studios and TV networks. 

1 comment about "Facebook Isn't Making Enough Money?".
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  1. John Motavalli from Freelance, January 12, 2017 at 11:12 a.m.

    Another way to look at this. Nielsen says there are 116 million homes in the US. Let's assign three people to each home. That would mean that Facebook is reaching something like 6 times more people than any TV network.

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