No one questions the power of the Facebook platform, reaching over 2.7 billion people around the world every month. Today, we learned some more about how much video is being consumed on Facebook Watch, but plenty of questions remain.
Facebook starts with one big number and that’s how many viewers they have around the world who are viewing videos on Facebook Watch every month: 720 million.
But behind the big number isn’t a lot of detail. Facebook has decided to tell us nothing about actual viewing numbers of any of its shows. Facebook was very vocal at launch ten months ago, when it said it would be spending over $1 billion on content for Facebook Watch.
We have not heard what they’ve spent in 2019, or what their plans are for 2020, and they are under no pressure to disclose those numbers. To its credit, Facebook has signed up a raft of shows and clearly is spending money in the competitive market for content.
Facebook is facing a lot of competition for high-quality, high-priced video programming and questions remain whether it is prepared to pay what, Netflix, HBO, Amazon, Hulu, Disney are actually paying for their award-winning programs and series.
The bigger question is, who exactly is Facebook Watch reaching, and what are those viewers actually watching.
Here is what we do know, of those 720 million viewers, 140 million Facebook Watch consumers spend at least one minute a day with the social network’s video platform. Not a terribly compelling stat.
Facebook goes onto say the average daily visitor to Facebook Watch spends 26 minutes with the network. Facebook's strategy is to siphon off viewing time from YouTube, cable television and other video streaming networks.
Facebook launched Facebook Watch in August 2017 with the strategy of becoming a rival to Google’s YouTube platform. At launch, Facebook said video content producers would get 55 percent, and Facebook would keep 45 percent of the advertising revenue generated by each program, or series.
While Facebook is spending on programming and has a huge video installed base, the bigger question is what are they charging advertisers for Facebook Watch’s video eyeballs? Because while Netflix charges a monthly service fee for its video content, Facebook Watch is free and revenues are generated through advertising.
We’ll find out more about Facebook’s users, viewers, and advertising revenues when the company’s next earnings report is released on July 23.
Another question on Facebook investors minds is what impact may any new regulation or oversight in Washington have on the company?
Facebook’s recent settlement with the Federal Trade Commission has been described as costing $3 billion to $5 billion in a “quick settlement.” Do Facebook shareholders not have any questions about what they got for $3-5 billion, and what other legal scrutiny may be ahead for the social network in Washington.
While Google, Apple, and Amazon are also in Washington’s regulatory crosshairs, Facebook seems to be a lightning rod for controversies and public relations disasters.
On June 12, The Wall Street Journal reported Facebook has uncovered emails that may connect CEO Mark Zuckerberg to “knowledge of questionable privacy practices.” The report goes onto say the emails pushed Facebook towards a quick settlement of its Federal Trade Commission investigation.
Facebook shares have been on a bit of a rollercoaster ride. Just in the past week, Facebook has gained nearly 6 percent, while losing more than 5 percent over the past month. But Facebook shares are 7 percent lower than a year ago, while also posting a return of more than 35 percent since the start of 2019.
MoffettNathanson is one media and technology analyst that issued a bullish call on Facebook on June 12. MoffettNathanson upgraded the stock from Neutral to Buy with a $210 price target, which would suggest investors can expect a 20 percent increase in Facebook shares.
Michael Nathanson of MoffettNathanson wrote in his research note that Facebook has “improving underlying fundamentals,” which in his firm’s view, offset any regulatory risks. Pulling back the curtain on Facebook’s strategic shifts in its business, MoffettNathanson says Facebook is successfully monetizing its Stories products, which span Instagram, Facebook, and Messenger. But how exactly does Facebook Watch become more integrated with Stories, not to mention Instagram, Messenger, and WhatsApp.
In Facebook’s latest earnings report back in April, the company beat on both the top and bottom line, with $15 billion in quarterly revenues and Daily Average Users at 1.56 billion, Monthly Average Users at 2.8 billion, and the important, Average Revenue Per User was at $6.42. But how much average revenue per user is being generated by Facebook Watch, and is it a cost center, or will it become a profitable unit in the future?
