Google vs. Facebook – Thin end of the wedge

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Video on Facebook is just the beginning.

• Facebook’s plans to unseat YouTube dominant position as a repository for video content are well developed and for the first time, Google must look to its defences.
• Video is just the beginning as RFM research strongly indicates (see here) that Facebook is in fact developing a fully-fledged ecosystem of its own.
• RFM also sees Facebook developing a gaming offering via messenger and its own digital assistant called Facebook M (see here).
• Together these would give Facebook 79% coverage of the Radio Free Mobile Digital Life Pie ahead of all of its peers.
• If it can then put all of these things together in a way that is easy and fun to use, consistent and integrated then there could be very significant revenue upside in the long-term.
• However, the immediate focus remains video and here Facebook’s strategy gets clearer almost on a daily basis.
• Facebook is now testing a new feature called suggested videos which aims to make discovery of videos on Facebook easier.
• Also in development is the ability to watch videos in a floating pane while browsing other areas of Facebook as well as a dedicated area of Facebook just for watching videos,
• Video on Facebook has so far not been a problem for Google as almost all of it has been shared to Facebook via YouTube.
• This has meant that Google has still had access to the data generated from users watching videos within their newsfeeds.
• However, over the last 18 months this has changed radically with over 70% of Facebook videos now being uploaded directly to the service compared to just 25% in February 2014.
• Facebook’s video content is still very different to YouTube’s in that YouTube remains the global encyclopaedia for video content but Facebook clearly has big ambitions.
• It is not going to stop at videos that its users find amusing or are relevant to their daily lives but I suspect will go on to challenge YouTube for the global crown.
• Facebook videos also attract better interaction and commentary from users which is also a key part of understanding and monetising users.
• I would not be surprised to see Facebook launch a premium video offering over time, bringing it into contention with Amazon Prime, Netflix and the like.
• Facebook and Google are currently running neck and neck when it comes to spending by advertisers on digital video but all the momentum is currently with Facebook.
• However, to really take share from Google, Facebook has still has some distance to go but I think that the alarm bells are already ringing in Mountain View.
• This combined with Google’s inferior user experience on Android, its inability to update the software on its ecosystem devices and falling traction with developers all contribute to my increasingly cautious view on the outlook for Google.
• Facebook is not cheap and so I am looking for a short-term correction to create an entry point for a very long term position in Facebook as it develops its ecosystem.