Facebook - The reverse birth of a video empire

I thought that you first come up with a way to earn from ads and then you invest money in your solution. Yet, guess what, Facebook proved me all wrong. The busy little marketing bees in Facebook are already investing and apparently they plan to worry about ROI based on ads a little bit later. What's going on?

Well, according to the Wall Street Journal, Facebook has already signed and it's still signing hundreds of contracts worth more than $50 with dozens of celebrities and media companies. Why? It works like this. Facebook gives you money, and in return, you oblige to produce videos to be used for its live-streaming service. It sounds like a plan. But, what's the plan, really? In this case, Facebook wants to ensure that it gets a fresh supply of videos, while it's trying to figure out a way how to compensate video producers. For instance, a fair share of ad revenue or similar. It sounds like there's a lot of improvisation here, which isn't something you expect from Facebook. You're paying money and you're in the hurry. This can mean only one thing. You're expecting even bigger money in return.

As soon as I saw a list of the top contracts, I knew that this is supposed to be huge. The BuzzFeed is supposed to get $3 for a one-year live broadcast. The New York Times will get more or less the same amount, and CNN will have to satisfy with the $2.5 million worth contract. Is this a waste of money and a huge gamble for Facebook? Well, according to the statistics, Facebook users spend more than 100 million hours daily on average for watching videos. And, that's only the beginning. So, you don't have to be Mark Zuckerberg to guess what Facebook has to do to ensure its future and revenues, do you?

We all know that Facebook is an advertising mean machine that breaths down Google's neck in terms of profit. Yet, I was a little bit surprised to find out that Facebook gets only one-fifth of the US mobile ad pie. On the other side, we have the digital video market, which is worth almost $10 billion in the USA alone. So, you get the picture. As expected, the publishers themselves are also eager to catch the right wave. They're already investing a lot in high-quality video production in order to get the front row seat reservation for the high advertising prices. So, this early live-streaming partnership with Facebook can ensure them a competitive advantage, once it becomes possible to sell ads for videos.

Here's one more interesting question. How long it's going to take for Facebook to reach the optimal profit speed? Well, the things are developing pretty much quickly. In January, only one in ten corporate Facebook pages posted a video. In May, this trend completely transformed when one it two companies with a corporate profile on Facebook begins posting videos here. What's very likely to happen in December? My best guess is, you'll have to cry your eyes out in order to find a company, which still didn't post a video on Facebook. For what is worth, we have to admit that Facebook is a newbie in the world of live-streaming. However, when you have more than 1.65 billion potential video material users, you feel good about trying it yourself.

For the time being, Facebook is focused on live videos and gives an advantage to publishers with an established popularity, including their willingness to supply the desirable number of videos. You can rest assured that a Facebook list of video suppliers is an impressive one and diverse. There will be a video for every man's taste and personal preferences. So, it's going to work for sure. The only trouble is that these video production contracts are supposed to last until the first half of 2017. What's going to happen after they expire? Facebook is going to renew them or offer an alternative to the publishers in terms of compensation. It's not very likely that Facebook plans to spend hundreds of millions of dollars every year for our entertainment - exclusively.

Again, how can Facebook make sure it's going to work? Well, there were some signs and very important indicators. If you recall, the BuzzFeed played with a watermelon and rubber bands a couple of months ago. This famous watermelon explosion video has been seen on Facebook more than 10 million times. Yet, that's nothing compared to 160 million views, which belongs to a lovely lady who played with a Chewbacca mask in her car. Talking about live-streaming videos, you don't have to worry about missing a thing. Once the "premiere" is over, your video will be stored on Facebook for other users to watch it when it suits them the best. Yet, why this emphasis on live videos? Well, according to the statistics, users watch live videos three times longer compared to any other video types. However, there are no guarantees that live videos will provide three times more lucrative ads compared to other advertising forms. Let's wait, watch and see.