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Meet video’s new No.1 contender (preview)

YouTube's still champ, but Facebook is coming on strong with a smart new strategy

YouTube celebrated its 10th anniversary in February, and it’s been nothing but kittens and double rainbows for the online-video giant since it uploaded its first video—an 18-second clip called “Me at the zoo”—on April 23, 2005.

YouTube has become synonymous with online video, with more than one billion users and approximately 300 minutes of new content now uploaded every minute. While Google does not disclose financial results for YouTube, Wall Street firm Jefferies & Co. said last year that the company will generate approximately US$5.9 billion in worldwide revenue this year. Research company eMarketer reports YouTube accounts for about 20% of all U.S. video-ad spending.

But while its lead in the online video advertising space might once have appeared unassailable, YouTube is now facing a significant threat from social media rivals Twitter, Tumblr and Facebook, all of them keen to grab a piece of the growing online-video market, which is projected to grow by nearly 24% per year through 2018, according to PWC.

Twitter introduced promoted video ads in August, while Yahoo recently debuted new autoplay video ad units for Tumblr, called “sponsored video posts,” as it looks to achieve US$100 million in revenue for 2015.

FBSource1It is Facebook, though, that has been particularly aggressive in its pursuit of online video dollars, and now stands as the biggest threat to YouTube’s dominance. It has introduced ads that begin playing soundlessly as users scroll through their newsfeed (users can click for sound), as well as a suite of comprehensive video metrics that provide advertisers with information including the average duration of a video view, views to various time increments (25%, 50%, 75%, and so on) and an “ads reporting view” that shows how well videos perform against specific audience targets.

In January, the social media giant announced that the number of video posts per person has increased 75% globally over the past year, with the amount of video posted by individuals and brands more than tripling on a year-over-year basis. It now averages more than one billion video views each day. Meanwhile, a January report from research firm SocialBakers.com said that natively uploaded videos by brands on Facebook have “completely overtaken” YouTube, with brands in the U.S. posting 20,000 more videos on Facebook than they did on YouTube during the key December period.

History will show last year’s ALS ice bucket challenge as a defining moment in Facebook’s adoption of online video, when more than 17 million “challenge” videos were shared on the site through the summer. These videos were viewed more than 10 billion times by more than 440 million people. It continues to make major inroads this year, with a recent story in International Business Times reporting Facebook accounted for one-quarter of all Super Bowl ad views.

Facebook’s continued investment in the online video space is not surprising, given the area’s huge growth potential. According to PWC’s most recent “Global Entertainment and Media Outlook” report, the online video ad market will grow by 23.8% per year through 2018. And according to a December report from eMarketer, Canadian marketers spent approximately $239 million on digital video advertising (including in-banner, in-stream and in-text ads) in 2014, a 44.8% increase over 2013. EMarketer projects Canadian spending on digital video will reach $474.5 million by 2018.

Analysts, too, are predicting that video will fuel Facebook’s next wave of growth, with U.S. investment bank JMP Securities describing it as a “multibillion-dollar opportunity” in an October report.

“[Facebook is] not stupid,” says Karel Wegert, vice-president of digital solutions for Media Experts. “They know perfectly well that much of the activity that ends up driving traffic to YouTube comes from Facebook [as much as 16%, according to reports]. They’re looking at ways they can keep those views within Facebook.”

Veronica Holmes, president of digital for ZenithOptimedia, in Toronto, says Facebook possesses some key features and attributes that help distinguish it from YouTube.

While Holmes says the latter is better positioned to deliver music, how-to and entertainment content because of its search, subscriptions and playlist functions, Facebook excels at delivering “topical and timely” videos, as well as the ability to promote discovery by embedding videos from multiple sources such as YouTube and Vimeo.

Holmes says a Facebook partnership with Instagram, which it owns, could further stimulate growth in its video views, as users ramp up the production and distribution of personal videos to friends and family. “There may be less friction to share a personal video on Facebook versus YouTube,” she says.

One of the biggest challenges for Facebook video, she says, is maintaining relevance across the entire user experience. “There’s been a lot of work to minimize the click bait and ‘you’ll never believe what happened next’ type headlines,” she says.

“What’s charming or fun one day can grate on the nerves the next [she cites the recent furor over “the dress” as an example], and Facebook is very much a push experience versus YouTube’s pull.”

There’s more! Get more analysis and context of Facebook’s big video play from industry leaders. You’ll be able to read the full article in the latest issue of Marketing. And subscribe today for full access.

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