Clash of the titans

Is Facebook catching up with YouTube and threatening to steal its online video throne? EGR DM finds out more

The explosion of online video has caught the attention of many social media firms with Facebook the most recent to push forward with its video strategy.

Facebook CEO Mark Zuckerberg told analysts in January that the social-networking giant is “exploring ways to give people a dedicated place to watch video on Facebook”. He reiterated that video is an important part of the Facebook experience and that the social media firm continues to invest in this area. “We’ve been testing new experiences like suggested videos, which enables people to discover more videos they might be interested in,” he said.

YouTube has long held the crown of online video king with more than one billion users per month, or almost one-third of all people on the internet. The number of hours people spend watching videos on YouTube is up 60% year-on-year. “It’s still the main place people go for video,” says Jan Rezab, founder and chairman of social media analytics firm Socialbakers. “YouTube is now receiving less referral traffic from Facebook since fewer YouTube videos are being posted onto Facebook, but YouTube is still a huge and growing video platform for both consumers and marketers.”

Adding weight to Facebook’s video threat, Zuckerberg said 500 million Facebook users – about half of the daily user base – are collectively watching more than 100 million hours of video on Facebook each day. Socialbakers also reported that native Facebook videos get more reach than any other type of post. “If you’re posting video onto Facebook, for example, you should post it natively – because of the format and nature of native video on Facebook, we find that it gets more engagement from viewers, some of which is due to autoplay,” says Rezab.

But Facebook is clearly nipping at YouTube’s heels as video was once again the focal point for analysts on its latest earnings call. Facebook reported total earnings of $17.9bn and advertising revenue of $17.1bn in 2015, up 43.8% and 48.7% respectively from 2014, in line with global information firm IHS’ forecasts. IHS estimates that Facebook generated $1.29bn in video advertising revenue in 2015, accounting for 7.6% of total advertising revenue.

Video vision
One of the factors driving Facebook’s strong revenue growth is the expansion of video content and video advertising. In 2015, Facebook focused its efforts on expanding its video content and increasing its video advertising capabilities. The company made deals with numerous content creators, including National Geographic, the New York Times and HBO, to host video content on its platform.

In the last earnings call, Zuckerberg also hinted that Facebook is looking to launch its own video player separate from the Facebook platform.

One of Facebook’s strategies is to tap in to the TV buyer’s budget, says Eleni Marouli, senior analyst, advertising and technology for IHS Technology. “If you look at Facebook revenues and the number of advertisers, the average revenue per advertiser works out at around $1,500. So the advertisers that flock to Facebook tend to be those smaller businesses. As they’ve already grown their user base, it’s going to plateau eventually. Growth is going to have to come from increasing spend. To get to the big brands, you need to offer a TV-type ad offering,” she adds.

And how are egaming firms maximising the online video opportunities through Facebook and YouTube? 888 has been using both platforms and Itai Pazner, its SVP B2C, says the industry is still learning about the opportunities and effectiveness of online video campaigns. “Many advertisers are allocating a percentage of budget to video because they realise people are shifting to online video. In the UK the traditional media agencies advise their clients to allocate about 15% of their budgets to online video,” he says.

Pazner also highlights the difference between TV and online ads. “At the beginning we debated, is this part of our TV campaigns or an extension on top of TV spend? Do we see this as 30-second TV spots or do we perceive it as an online channel just like we used to with PPC, affiliates or display ads where we expect direct click through and conversion? Once we started we figured out that it’s neither of those.”

For Gaming Realms᾿ chief marketing officer Simon Smiley, Facebook video continues to outperform YouTube on almost any metric. “But recent moves by Google in improving the way we can target our audiences is definitely helping things,” he admits. “YouTube is therefore now a growing part of our media plans, but could be so much bigger. I guess, in short, Facebook gets an A star and YouTube gets a B minus with a ‘capable of so much more’ rider,” adds Smiley.

Setting the challenge
So is Facebook threatening to overtake YouTube in the video marketing battle? It’s certainly becoming a challenger, says Marouli. “According to our forecasts Facebook will not overtake YouTube in the near future in terms of online video revenue but they are going to get much closer.” IHS Technology forecasts that Facebook will generate global video revenue of $5.9bn in 2018, catching up with YouTube’s forecasted $7.9bn.

Smiley takes a different stance and believes Facebook is streets ahead. “If you are working in a business which is data and results driven then Facebook has always been way ahead of YouTube. It’s not a case of Facebook threatening to overtake YouTube, it’s been ahead of YouTube for the past two or three years,” he says.

There are also some hurdles to overcome, according to Smiley. “Google still struggles to bring the level of audience targeting and first-party data usage that Facebook excels at – not least because Google still treats gambling as a vice industry in the UK and closes off so many of the useful advertising tools for us. Video has expanded on to Instagram and Facebook’s Atlas makes display marketing more possible for gambling marketers than Google’s DoubleClick does,” he says.

Danny Blackburn, content director at Stickyeyes, argues that Facebook and YouTube are both powerful tools and more often than not companies need to use both in an integrated way. “I don’t see it as an arms race between the two,” he says. “The question is which can be used most effectively to meet your specific objectives?”

And which platform you choose is down to what you’re trying to achieve. “If you’re trying to raise awareness and reach a lot of people and be targeted then Facebook is fantastic. YouTube is more about building a video presence,” adds Blackburn.

Search and consume
One of the key differentiators between the two platforms is the type of video consumed and the way in which videos are found. “Facebook is much more of a discovery platform whereas on YouTube you tend to search for a specific video,” Marouli points out. “Although Facebook has noted massive growth in video views or video users, the majority of videos are still auto-play and quite short so it’s a very different video experience.”

Due to the sheer amount of video on YouTube, it can sometimes be difficult to find exactly what you’re looking for. “Someone once told me that YouTube is a brilliant place to hide your video. Unless you’re thinking about how you’re putting that video in front of people you’ll potentially struggle. For both mediums you really need to think of that content distribution part as much as the content creation,” Blackburn points out.

888’s Pazner says the cost model works differently on Facebook and YouTube. “The financial advantage with YouTube is that you don’t have to pay if someone does not view the whole ad and you can segment better than traditional broadcast formats like TV and radio. On Facebook you have to pay full price for any ad that plays over three seconds. There are different matrices that we use to measure them,” he explains.

The future is social
So what do Facebook and YouTube need to do to monetise video further and better in the future? “Facebook is going to need to come up with a more engaging format or a more engaging experience that will allow the traditional TV ad formats to work online,” remarks Marouli.

“For YouTube it could be the year it takes off because video is growing. It’s just a matter of making the right call at the right time to absorb those ad dollars before Facebook does,” she adds.

And perhaps Facebook and YouTube should watch their backs as the likes of Snapchat creep up behind them in the pursuit for online video domination. “Snapchat is the first platform to have really good content partnerships with the likes of Viacom and is doing really well with mobile native video through vertical rather than horizontal video. The ad format works really nicely and is very intuitive so a lot of ad dollars are moving there too,” Marouli says.

While online video can be a lucrative prospect if executed in the right way, finding a good way to monetise mobile is going to be the best way of safeguarding advertising’s future in the long term.