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Can Facebook Watch Compete With Rival Streaming Giants?

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On Aug 30, Facebook, Inc. (FB - Free Report) went global with its video platform Facebook Watch, a year after launching in the United States. The feature is a special section on the social networking platform that focuses on video content. It goes without saying that the move will now allow Facebook to better compete with its rivals like Alphabet, Inc.’s (GOOGL - Free Report) YouTube, Netflix, Inc. (NFLX - Free Report) and Amazon.com, Inc.’s (AMZN - Free Report) Amazon Prime.

The streaming market is fast growing and an increasing number of players are fast trying to explore the pace. The new feature launched by Facebook is definitely in a move to tap the growing streaming market by making use of its 2.2 billion users. Moreover, Facebook’s user growth has been slowing and video streaming feature might just give the social media giant the much-required boost.

Facebook Challenges Rivals 

A year after launching Facebook Watch in the United States, the company has now introduced the feature globally. Facebook Watch will offer a range of shows that users can choose from. Facebook Watch creates a personalized feed for each user and offers a watchlist of a collection of videos from Facebook pages, which a user follows. Moreover, the feature also allows users to save videos and watch later.

Also, much like Google’s YouTube, the new feature will allow videographers to upload their content with the option of monetizing it with ads. Reportedly, the revenues from these ads will be split, with 45% going to the creator and the rest to Facebook. 

Facebook, undoubtedly, will now intensify the online streaming war by throwing up a challenge to its rivals like Netflix, Amazon and Alphabet, which have so far been dominating the streaming market.  

Can Watch Help Facebook Bounce Back?

According to Facebook, more than 50 million users in the United States viewed videos for at least one minute a month on Watch. Moreover, the total time spent by a user on watching videos on Facebook has increased 14 times since the beginning of this year.

Understandably, the company is likely to utilize its 2.2 billion users to earn higher revenues. Although the social media platform has been a late entrant to the thriving streaming market, Facebook has plans of spending up to $2 billion to create and produce content on Facebook Watch.

Moreover, Facebook’s user growth has been slowing, which is posing a challenge for the company. In fact, despite its dominance as a social media platform, Facebook has witnessed a decline of 3.8 billion visits in the last two years.

In late July, Facebook’s shares tumbled after its average daily user growth missed analysts’ expectations in the second quarter. This has been dampening the revenues of the company. That said, despite its slowing user growth, Facebook still is a dominant player in social media and its huge user base can definitely help the company explore the streaming space.

Stream War Heats Up

Facebook definitely has big plans with Facebook Watch but others too are investing aggressively on creating online content. According to Andy Fisher, chief analytics officer at marketing agency Merkle, the digital advertising market has huge potential and is fast growing. However, brands spend only $13 billion per year on online video.

The huge potential has seen an increasing number of companies fast trying to penetrate the growing streaming market. Netflix is expected to spend $13 billion in 2018 on original content only available to subscribers. Amazon too isn’t lagging, with the company having spent more than $4 billion on Amazon Prime last year. The amount is only likely to increase this year. Amazon sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Understandably, competition is likely to intensify with the likes of Walmart, Inc. (WMT - Free Report) too planning to jump the bandwagon. According to Variety, Walmart is reportedly planning to reposition Vudu, its video locker service, as an affordable video streaming service. Also, Apple, Inc. (AAPL - Free Report) is investing in original content and developing its own streaming service.

Given this scenario, it is likely that more players will try to explore the streaming market. Facebook, despite being a late entrant has the potential to ride on its strong user base, to generate higher revenues from the growing streaming market.

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