Facebook's New Focus on Video Ad Revenue Probably Spells Disruption

Courtesy of Facebook
A woman watching a video on her Facebook news feed onn iPhone.

Mobile devices accounted for 41 percent of digital video views worldwide in March.

Content owners, get ready to make money from videos at Facebook. 

News that Facebook wants video content from major labels and other content providers (NBA, Fox Sports, Funny or Die) shouldn't come as a surprise. Ooyala data at eMarketer helps explain why Facebook is clamoring for higher-value video content: Facebook gets most of its activity from mobile phones, and mobile video is exploding. 

In the first quarter, mobile phones' share of global digital video views grew to 34 percent in March from 15 percent a year earlier. With an additional 7 percent of digital views coming from tablets, mobile devices accounted for 41 percent of views in March, up nearly double from a year earlier.

Mobile video skews young. Nielsen's Total Audience Report for Q4 2014 says the 18 to 24 age group spent 26 minutes per day watching video on a smartphone. The numbers dropped off from there: 17 hours per week for the 25 to 34 age group, 13 for the 35 to 49 group, and 7 minutes for 50 to 64. Not surprisingly, time spent watching traditional TV increased with age. The 18 to 24 age group watched 18.5 hours of TV per week. The 50 to 64 age group watched 42.5 hours per week.

There were reports (that proved not to be true) in early 2012 that Vevo was talking to Facebook, and might leave YouTube. That didn't happen, and since then Facebook has grown its share of video streaming.

But Facebook videos have a money problem. As explained in a June article at Fortune, Facebook is rapidly expanding its emphasis on video but hasn't had a way for its video stars to make money. It can offer a massive audience and the potential to go viral -- see the Facebook-driven "Ice Bucket Challenge" video of 2014 -- but until now hasn't been able to offer a revenue split.

Now the money is following the traffic. This is bad news for YouTube. Facebook is offering content owners the same 55-percent share of advertising they get from YouTube -- but Facebook's pitch also includes the ability to get eyeballs in the Facebook News feed, whether or not a person subscribes to the content owners' channel.

Facebook is the natural contender for YouTube's title as online video leader. Fortunately for a record business is search of digital growth, content owners will be the ultimate winner of this battle.