Potential Challenges In Facebook Inc (FB)’s Way To Becoming A Digital Video Powerhouse

Facebook Inc (NASDAQ:FB)’s video business faces two major risks that could disorient or slow down the company’s gain in online video market. The company is trying to establish itself as the go-to place for online video, effectively declaring war on Google Inc (NASDAQ:GOOGL)’s YouTube.

As of April, Facebook was recording over 4 billion video views daily, a significant rise from 1 billion views as of September 2014. The company recently made announcements that clearly spelt out its video agenda, but challenges abound.

One of the recent video announcements from Facebook was a new format for buying video ads on the platform. The new video ad format enables advertisers to pay only when a video is viewed for at least 10 seconds. That is a better strategy for marketers than where they have to pay when videos simply appear on news feed.

The other announcement that Facebook Inc (NASDAQ:FB) made was about a revenue sharing system akin to that of YouTube, where video creators take a cut for ads served against their content.

Although Facebook is clearly trying to make its video strategy appealing to both creators and viewers, the company has two challenges to address.

Original content

Facebook Inc (NASDAQ:FB) requires both high-quality and original content on its video platform to bolster its competitive edge against YouTube. However, Facebook’s video platform is still infested with pirated videos. The company is only trying to identify and remove videos that it believes infringe on other people’s rights.

The risk of copyright violation has prevented Facebook from widespread rollout of its monetization strategies. The company will need to be more robust in its fight against video piracy before it can start to fully commercialize its video platform.

Incentives for content creators

Fighting piracy is just a small part of what could bring video creators to post on Facebook Inc (NASDAQ:FB). The company needs to come up with more and better strategies to enable creators make real money from their efforts. YouTube is already benefiting from a constant stream of new content because its ad sharing strategies put a lot of money in the wallets of creators.

Video creators need to see how Facebook is helping them to get rich before they can think about abandoning YouTube.

Neha Gupta

Neha Gupta has been in the financial space for over six years now. Gupta earned her MBA degree from Symbiosis Centre of Distance Learning in 2009 and her passion for finance led her to pursue Chartered Financial Analyst (CFA) course. She has successfully completed Level II of her CFA. She is a veteran in article writing, which is depicted in her numerous pieces published on SeekingAlpha, Nextiphonenews, InsiderMonkey, MarketWatch, and Techinsider. Her crisp and eloquent writing finds its best place in Researchcows, where emphasis is given on developing rich content for various websites, products, business plans, trainings, and book writing.

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