Facebook Inc (NASDAQ:FB) is willing to loosen its purse strings on video spending.
Just a few weeks back, reports emerged that California based tech giant Apple Inc (NASDAQ:AAPL) intends to spend up to one billion dollars on original content programming. Well, it turns out, Facebook Inc (NASDAQ:FB) is not far behind. According to reports, the social media giant is also willing to splurge over billion dollars on content production. The content market is getting hot with all the big tech names, the FAANGs, throwing in their hat. While Apple is entering the content market to drive its service segment revenue growth, Facebook is looking to mitigate the impact of "ad load" saturation in the news feed. FB stock has faced resistance due to the concern of revenue growth slowdown. While both Apple and Facebook are willing to spend over billion dollars, it is much less than what others like Netflix and Amazon are planning to spend this year on content.
Facebook's willingness to splurge on original content displays its video ambitions. The company had recently launched 'Watch' a new subsection on its website for viewing videos. Facebook has been emphasizing on its video ambitions over the last few quarters. During the conference call, Facebook CEO Mark Zuckerberg said that "We've talked about how video will continue to be a big focus and area of investment for us. It's growing quickly, and we're introducing new features to make the video experience even better."
Facebook Inc is aiming to capitalize on shifting ad dollars.
The push towards videos is to capitalize on shifting viewers and consequently ad dollars from TV to digital. According to an eMarketer report, for the first time, ad spending on digital surpassed TV ad spending last year. According to the report, U.S. digital advertising by the end of 2016 will rise to $72.09 billion, while TV spending will account for $71.29 billion. "Digital advertising is not only pulling dollars from traditional media, but it’s also creating new advertising opportunities at the local and national level," eMarketer forecasting analyst Martín Utreras had written in the report. Digital ad spend is expected to grow at a CAGR of around 12% from $72 billion in 2016 to $113.18 billion in 2020, compared to 2.2% growth TV ad spend is likely to register.
Facebook Inc is having a sports focus.
Facebook intends to make watching videos a "social experience". "Watch" will encourage users to not only watch content but also discuss it. This is one reason why Facebook is very interested in sports broadcasting. Sports, with its strong team loyalties, tends to generate a very healthy and often animated conversation. Earlier in the year, Facebook Inc had inked a deal with Major League Baseball to broadcast 20 games live on Facebook this season. Baseball games are uniquely engaging community experiences, as the chatter and rituals in the stands are often as meaningful to fans as the action on the diamond," Dan Reed, Facebook's Head of Global Sports Partnerships had said. As you can see, the focus is on "engaging community experiences". In February, Facebook had live-streamed all 46 football matches of the Mexican football league Liga MX’s 2017 season.
A missed opportunity for Facebook Inc.
To augment its portfolio of sports broadcasting rights, the social media giant had recently bid around $600 million for the broadcasting rights of Indian Premier League, India's premier domestic cricketing tournament. While Facebook lost the bid to 21st Century Fox Inc.'s Star India, which bid $2.6 billion for broadcast and digital-streaming rights, Facebook's bid shows its earnestness. The $600 million bid was Facebook's largest bet on video content so far. Failed IPL bid was a missed opportunity for Facebook, given the huge popularity of cricket in India and the fact that India is Facebook's largest user base. Earlier, Facebook live-streamed a regular session NBA match between the Golden State Warriors and the Sacramento Kings exclusively for India.
The IPL bid is also a harbinger of things to come. Digital advertising is still small in India. According to eMarketer, digital ad spending in India will cross the billion dollar mark this year. In comparison, U.S digital sales will cross $72 billion this year. So if Facebook was willing to spend $600 million for a market as small as India, it could certainly loosen its purse strings even more for the bigger markets in U.S and Europe.
Facebook Inc VS Apple Inc: The Media battle gets heated.
It is not only the video content where Apple Inc and Facebook Inc are competing with each other. Facebook is also expected to spend hundreds of millions of dollars on music streaming rights. Facebook is close to clinching a deal with major record labels and music publishers which would allow, users of its social network to legally include songs in videos they upload, according to people familiar with the matter. All in all, Facebook and Apple are willing to spend big to create a space for themselves in the content programming space. Apple stock and FB stock are part of our top stocks to buy from tech sector which have outperformed the Nasdaq composite by around 140%.