Facebook is planning a more direct assault on YouTube, sources say

Key Points
  • Facebook has talked to media buyers about expanding Watch to more individual creators and creating an advertising system where everyone would get a split of revenue, similar to YouTube.
  • The company has also indicated that it will allow brands to select which shows they want to advertise on and potentially create a tiered advertising system to allow companies to advertise on top Watch videos.
Mark Zuckerberg, CEO of Facebook
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Facebook is talking about expanding its TV-like service, Watch, into a rival to Google's YouTube by opening the platform to more individual creators, according to several people familiar with the plans. This would increase the amount of long-form video content that Facebook can sell ads against, and could reverse a decline in the time users are spending on the site.

Facebook wants to allow more people to create their own shows on Watch, according to three media agencies who asked they remain anonymous because the conversations are private. Instead of buying rights to these shows, however, Facebook wants to create a system where creators can upload their shows for free, then earn a cut of the revenue from ads placed on that content — similar to how YouTube pays its online creators. Another source with knowledge of the situation said Facebook's ultimate goal is to create a sustainable ad-supported video platform, where it won't have to pay for the majority of content.

Creators are hungry for other video platforms that can earn them more revenue after YouTube made it harder to earn advertising money on its platform. Amazon has also talked to advertising agencies about creating more ad-supported video initiatives.

More broadly, the move continues Watch's encroachment into YouTube's territory. Currently not everyone on Watch makes advertising revenue. Facebook pays some media, production companies and creators for rights for their shows, ranging from $10,000 to $500,000 per episode depending on the length and exclusivity, according to four companies who have Watch deals. Some shows are uploaded for free on a "partner" basis.

Facebook declined to comment.

An opening

Launched in August 2017, Watch is an effort to get more long-form episodic shows on to Facebook in hopes of capturing more video advertising revenue from leader YouTube. Early shows on the service have included "Comeback Kids" by digital media company The Dodo, and "Struggle Meals," which shows users how to cook meals for under $2. Digital video advertising was a $5.2 billion industry during the first six months of 2017, according to a report from the Interactive Advertising Bureau.

Facebook said in December 2017 it will add commercials before videos, a first for the platform. At the same time, to make sure users stay engaged, Facebook is requiring videos to be at least three minutes long to qualify for ads in the middle of them, and those ads can appear only after 60 seconds of content. Previously, videos only needed to be 90 seconds to qualify for ad breaks, and an ad could appear after only 20 seconds.

Facebook also hopes the move to long-form video will keep people on the site longer. Last quarter the company said time spent on the site was reduced by 50 million hours per day, partly because of News Feed algorithm changes.

Google has provided an opening for Facebook as it clamps down after an advertiser backlash over ads appearing next to inappropriate content. To combat the problem, in January it announced a revamp of its advertising program Google Preferred, which allows companies to buy ads on its top "safe" videos. Under the new rules, a human must review every single video that qualifies for the program. It now also requires creators to have 4,000 hours of "watchtime" over a year and more than 1,000 subscribers in order to earn advertising revenue, as opposed to a previous threshold of just 10,000 lifetime views.

Media agencies say their clients are excited about the prospect of video advertising on Facebook, but most of the money is earmarked for buying sponsored placements in the News Feed rather than Watch ads. Brands are hesitant about advertising on Watch, and are particularly concerned about where their ads might appear, because Facebook category designations are extremely broad.

Expanding Watch to more creators will make it harder for Facebook to vet content, they note.

However the company told two buyers it is thinking about allowing the purchase of specific shows starting in Q2. The method, which is similar to how television is sold, could be a way to weed out lower-quality shows — which won't earn ad revenue — and may convince advertisers to spend similar amounts of money as they would on television commercials. Facebook also seems to be considering creating a tiered advertising system, similar to YouTube advertising program Google Preferred, one source noted.

WATCH:  Facebook looks to expand video platform say sources

Facebook looks to expand video platform say sources
Facebook looks to expand video platform say sources