“I see video as a mega-trend on the same order as mobile. That’s why we’re going to keep putting video first across our family of apps and making it easier for people to capture and share video in new ways.”
Facebook (NASDAQ:FB) CEO Mark Zuckerberg said that on an earnings call with investors in early 2017. Ever since, Facebook has indeed made a big push into video, which is a space traditionally dominated by YouTube.
Facebook has launched its Watch tab, poured money into original programming, heavily pushed and grown Instagram Stories and WhatsApp Status, and much more. All of these moves have made it easier for people to capture, share, and consume video within the Facebook ecosystem.
Recently, the Facebook video push has shifted into a higher gear.
Namely, Facebook has launched IGTV (a long-form video feature within the ultra-popular Instagram app). Instagram Stories has crossed the 400-million-user mark and is now double the size of Snap (NYSE:SNAP).
Facebook is in talks with global soccer superstar Chirstiano Ronaldo regarding a reality TV show. And the company has won exclusive rights to stream Premier League soccer matches in southeast Asia.
In other words, over the past several weeks, Facebook video has made some big moves. The sum of those big moves will inevtiably drive Facebook stock higher in the long run.
Here’s a deeper look.
Facebook Video Is the Next Big Thing
Zuckerberg is right. Video is a mega-trend, in the same order as mobile.
While younger audiences, and audiences in general, are watching less cable television, that doesn’t mean they are watching less entertainment content in general.
Instead, teens are getting their entertainment fix through direct video platforms like YouTube and Netflix (NASDAQ:NFLX). It is reported that 71% of teens spend more than three hours a day on their phones, and that a large chunk of that time is dedicated to watching videos.
This shift from linear to internet entertainment consumption is still in its infancy. Over the next several years, traditional linear entertainment consumption will continue to drop, and new internet entertainment consumption will continue to rise.
This will happen among all demographics, not just teens, because internet entertainment offers enhanced convenience, lower costs and an overall higher value prop.
Facebook has the potential to be right at the center of the internet video mega-trend.
Granted, today it is Netflix and YouTube who are at the center of the mega-trend. But no one reaches more people in the world than Facebook, and no one reaches them in greater frequency.
Between Facebook, Instagram, Messenger and WhatsApp, the Facebook ecosystem reaches billions of people across the globe, all of whom are using the Facebook ecosystem for various purposes ranging from news consumption, to communication, to entertainment, to photo sharing.
Because of this, all Facebook really has to do to be at the center of the video mega-trend is pour a bunch of money into video. It has the audience and distribution channels. Now, all it needs is the content.
Big Investments Are Paying Off
Facebook is committing a bunch of resources to get that content, and the early results are promising.
Instagram Stories has been a major hit. There are now 400 million users on IG Stories, double the number of people on Snapchat. A few quarters ago, IG Stories didn’t even exist. This absurd growth will continue because Stories are the new form of communication, and Instagram is the biggest Stories platform in the world (network effects).
IGTV, which just launched recently, will follow in the footsteps of Instagram Stories. Instagram influencers, who have already amassed a massive following on Instagram through their posts and Stories, will naturally jump into long-form content creation via IGTV.
At that point, because Instagram already has 1 billion users, network effects will kick in, and IGTV will become a YouTube built within Instagram.
Facebook Watch hasn’t exactly caught on just yet. But, that is just because the content hasn’t been as compelling as it needs to be.
That will change soon. If Facebook lands Ronaldo for a reality show, that would be a game-changer. If you think athletes like LeBron James or celebrities like Kim Kardashian are popular, think again. Ronaldo is on different level when it comes to global stardom. Just look at Instagram followers. LeBron has 39 million followers. Kim K has 113 million followers.
Ronaldo? He has 133 million followers. As such, a Ronaldo reality show could garner a huge following rather quickly and help grow awareness for Facebook video.
Concurrent to the Ronaldo reality show, Facebook also plans to stream Premier League games in southeast Asia. That is also a big deal. Soccer is the world’s most popular sport, and that is also true in southeast Asia, an area that accounts for roughly 10% of the world’s population and is home to one of the world’s most rapidly growing internet economies.
Bottom Line on FB Stock
Altogether, Facebook video is shifting into a higher gear. Stories is becoming massive. IGTV projects to be a smaller-scale YouTube. The Facebook Watch original content portfolio is gradually growing and improving.
The sum of these moves in Facebook video will put the platform at the epicenter of the internet video mega-trend, alongside Netflix and YouTube. Consequently, Facebook video will inevitably push Facebook stock higher in the long run as usage and advertising opportunities through video go up.
As of this writing, Luke Lango was long FB.
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