Facebook's YouTube competitor is pivoting to older audiences as teens tune out and publishers balk

  • Facebook's Watch, a hub for shows and premium video content, was intended to be its big competitor to YouTube.
  • However, it's failed to get recognition with users, who aren't used to watching long videos on Facebook.
  • The company may be trying to focus the product on older audiences after many of its younger users moved to Instagram.
Facebook CEO Mark Zuckerberg 
Justin Sullivan | Getty Images
Facebook CEO Mark Zuckerberg 

As Facebook struggles to find an audience for its YouTube competitor, Watch, the company has been talking to some media companies about focusing its efforts on audiences 30 years and older instead of teens and younger millennials.

The move signals more troubles for Facebook's video ambitions. Expansion in video, messaging, and Stories are key for the future of Facebook, CEO Mark Zuckerberg said during a call with analysts in October. The company missed revenue projections in the third quarter after predicting a revenue slowdown earlier this year, and the company's stock is down more than 20 percent on the year. Selling video ads is one way it is looking to make up for the slowdown in other areas.

Focusing on older users

Facebook launched Watch in August 2017 as a hub for video content. Users can follow series, and the platform recommends videos based on user behavior. The initiative is a way for the company to tap into digital video advertising, an industry worth $28 billion in 2018 according to eMarketer. Facebook has invested more than $1 billion buying original shows and content for Watch, per Variety.

But the service is not thriving, and many media buyers are ignoring it.

In August, the company said about 50 million U.S. users each month view Watch content. It's a tiny audience compared with YouTube, which said in May it had 1.8 billion logged-in viewers each month. Facebook acknowledged in a meeting with publishers in October that a lot of users are not familiar the Watch brand, according to one company in attendance.

In addition, Sarah Madigan, who was on the deal team for Facebook original series, left the company recently for MGM, according to her LinkedIn account. She previously was a director of content acquisition for Netflix.

At the same time, teens are losing interest in Facebook overall. A recent Piper Jaffray report showed only 36 percent of teens used Facebook at least once a month during fall 2018, down from 52 percent just two years ago.

With these trends in mind, Facebook is now soliciting video content for older users in hopes of making Watch more relevant.

In talks with at least three media companies, Facebook has hinted it wants Watch shows aimed at post-college millennials around parenting age and older. One media company said Facebook was asking them for shows hosted by traditional celebrities rather than social media stars. Facebook responded most positively to talent in their 30s through 50s.

Another company said Facebook said it wanted shows for a broad audience, but not focused on anyone who was under the age of 20. Any teen shows need to have adult themes that could attract older viewers. Facebook was also asking for more formats that may be familiar to traditional TV viewers and middle America, like reality and talk shows.

Facebook has pared down the number of shows it is purchasing. The few it supports has more household appeal for post-college viewers. "Queen America" stars Catherine Zeta-Jones, while talk show "Red Table Talk" stars Jada Pinkett Smith. "The Real World," while still on air, has more of a nostalgia factor for Gen Xers.

On the list of Watch shows available for advertising, only 25 percent are for people in their young 20s, one media buyer said. The rest are for an older audience, especially newer shows. Another media company who did an independent analysis of their competitors found just 15 percent of the top 25 shows on Facebook Watch are aimed towards teens and young adults.

In a statement, Facebook played down the significance of Watch as a stand-alone service separate from the News Feed, but said that video consumption rates are higher within Watch.

"We see Watch and News Feed serving complementary purposes, so it makes sense that video consumption and discovery are happening in both places," Matthew Henick, Facebook head of content strategy and planning, said in a statement. "People are increasingly coming back to Watch for an intentional, people-centric viewing experience, and we've seen that people view videos for five times longer in Watch compared to in News Feed. Most importantly, people are connecting with friends and other fans around those videos on Watch in a way they don't on other platforms."

Facebook also noted that some shows have successfully captured younger viewers -- for instance, it says, 75 percent of "Ball in the Family" viewers are under 35.

Publishers skeptical

When Facebook announced Watch in 2017, the company positioned it as a new source of revenue for publishers. Not only would Facebook pay for some shows, video publishers would be able to earn about 55 percent of the ad revenue on average.

Some in the publishing and advertising industry were skeptical whether Facebook could convert users. People came to the platform to read friend and family updates, not to view video.

"To get people away from the feed is a massive shift," said Jon Mottel, director of social strategy for Undertone. "They have to change user behavior to get out of that experience, not even considering the fact they have to get users to watch longer form content."

Facebook argued if companies posted great content, the viewership would follow. Watch would be set apart from its competitors because people could interact with the content, making it easier to create a community.

"The Facebook Watch user experience is very different than a lot of their other content and ad formats that are much quicker to consume," agreed Kerry Perse, managing director for social for media agency OMD. "The NewsFeed, the stories format, the entire Instagram platform is faster and skews slightly younger than the average Watch user. Facebook Watch require the user being in a different, more leaned-back mindset."

At an event for media organizations in October, Facebook Watch product managers acknowledged users did not know what Watch was, according to one person that was in attendance. Facebook was considering ways to teach more users about Watch, including NewsFeed posts explaining the service and notifications for people who have watched Watch videos but don't follow pages. Video publishers pushed back heatedly. They asked why they would invest in creating shows for Watch while their video views were decreasing in other areas of Facebook.

One media executive told CNBC that Watch episodes promoted by Facebook could get millions of views. Without the support, these same series averaged about 265,000 views per episode. The few successful shows are watched by an audience of parents and older, they added.

Even in the early days, when Facebook gave lots of promotion to the service, some advertiser-sponsored content wasn't able to get the minimum required number of views on Facebook Watch alone, and had to be cross-posted on other platforms like Verizon's Oath network, a media buyer noted.

Another media executive said no one is finding content on Watch independently, but only seeing content if someone else posts it on their NewsFeed. The audience for its "youngest" successful show on Watch right now is post-college.

A third media executive said often it was better not to sell a show to Watch, and just upload videos to Facebook without any exclusivity or requirements. Typically, the company makes more money being able to upload the same video to YouTube, Amazon and other video platforms than selling the series to Facebook.

Some TV ad buyers are confused by Facebook's pitch: Facebook is saying Watch is a great place to advertise, but it's also saying content under 15 seconds is the future, one media buyer said.

However, it's not all bad news for Facebook. One agency saw a 64 percent increase in Instagram's user base between September 2016 and September 2018. While brands aren't clamoring to be on Facebook Watch, they are very interested in Instagram Stories.