Facebook to up video investment in 2018 as it focuses on social interactions

Facebook plans to ramp up video investment throughout the rest of the year as it looks to differentiate its offering from rivals like YouTube by focusing on personal connections.

Facebook CEO, Mark Zuckerberg

Speaking on the company’s first quarter earnings call, CEO Mark Zuckerberg said that while passive video consumption is down on the site – a result of recent tweaks to how the Facebook prioritises content – it is stepping up efforts around interactivity.

“We’re trying to make a different experience than what you might be able to get on YouTube or any of these other services by making it more about connecting with people in different ways,” said Zuckerberg.

He claimed that Watch Party, a new feature designed to let groups of people watch and content and interact, is something that Facebook is uniquely positioned to build. Interactivity also ties in with Facebook’s video commissioning strategy for its Facebook Watch platform.

Asked whether Facebook had invested much on video content in the first quarter of the year, CFO David Wehner said, “It’s clearly going to be more weighted towards the rest of the year”. However, he also said that Facebook’s gross margin declined slightly, in part because of video content investment.

The comments came as Facebook reported strong revenue and earnings growth, despite the recent Cambridge Analytica scandal, which broke two weeks before the end of Q1, and the resulting scrutiny of Facebook’s data and privacy policies.

Asked about whether recent events had caused any changes in advertisers’ views about the platform or raised concerns about future ROI, Facebook COO Sheryl Sandberg said: “In the immediate days of the concern we heard from a handful of advertisers who paused spend, one of whom has already come back. We haven’t seen a meaningful trend or anything much since then.”

Sandberg also played down the suggestion that Facebook might try and follow in the footsteps of media rivals like Netflix or Spotify by exploring a subscription model.

“We certainly thought about lots of other forms of monetisation including subscriptions, and we’ll always continue to consider everything,” said Sandberg. “Ads for us is a very natural fit for our business, and we have a lot of runway ahead of us.”

She said that of the 80 million businesses currently using Facebook, some 6 million advertise. On Instagram there are 25 million Instagram business profiles, of which 2 million are advertisers. “Even if we just convert people who are advertising on Facebook into Instagram, that’s a lot of a growth opportunity.”

For the quarter Facebook reported a 49% year-on-year increase in revenue at US$11.97 billion. Net income rose 63% to US$4.99 billion.

“Despite facing important challenges, our community and business are off to a strong start in 2018,” said Zuckerberg. “We are taking a broader view of our responsibility and investing to make sure our services are used for good. But we also need to keep building new tools to help people connect, strengthen our communities, and bring the world closer together.”

Commenting further on Facebook’s focus on building relationships, he said: “This quarter we’ve continued shifting from passive consumption to encouraging meaningful interactions. It’s still early, but we’re starting to see some signs that this is working.

“Some types of sharing are increasing, even as passive consumption of video is down. At the same time, we’re rolling out more interactive video features like Watch Party that lets you watch videos with your friends. This is something we can uniquely do, and the feedback on it so far is great.”