Facebook (NASDAQ: FB) is undergoing a period of transition. Rising operating costs are weighing on the company's operating margin, and revenue growth is decelerating as the company doubles down on longer-term growth opportunities at the expense of News Feed ad impressions. Indeed, Facebook has said its near-term revenue growth could take a hit as the company begins prioritizing some of these less developed areas, such as messaging and stories.
One interesting aspect of Facebook's business that looks poised to get significant attention this year is video. While video has been a key part of News Feed for years, an aggressive effort to build video into a more focused product in 2019 could take it to a whole new level this year.
Facebook Watch. Image source: Facebook.
Video is a fast-growing media format across Facebook's platforms. "[W]e're seeing video grow dramatically across the ecosystem," Zuckerberg said in the company's most recent earnings call. Indeed, in recent years, Facebook even referred to video as a "mega trend" on par with the catalyst mobile was for Facebook as the company introduced ads on mobile devices.
Facebook's strategy to ramp up its video efforts became more apparent in 2018 as the social network launched Facebook Watch globally and rolled out IGTV on Instagram. Facebook wants to take video to the next level by building separate video experiences outside of the Facebook and Instagram news feeds. This is what Facebook Watch is for Facebook and IGTV is for Instagram.
Both services are off to a good start, Zuckerberg explained in Facebook's third-quarter earnings call:
At this point, Watch has really hit its stride and it's growing incredibly quickly -- about 3x in the last few months in the U.S. alone. IGTV is still earlier in its development, but I think we have a good sense of how to make it work as well.
In a more recent update on Facebook Watch, the company said there are now 400 million people who watch at least one minute of video on the service every month. In addition, 75 million people watch at least one minute every day.
The challenge and the opportunity
Still, building the rapid growth of video on Facebook into a major business catalyst won't happen overnight. Video monetizes at a lower rate per minute of user engagement than Facebook's News Feed. This means growth in video ultimately displaces other products that could have made the company more money -- at least in the near term. But Zuckerberg believes this is the right decision and that video will likely become "a large part" of Facebook's business over the long haul.
Throughout 2019, investors should watch to see how well Facebook executes on its video initiatives.
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