Facebook’s FB video initiatives have been significantly driving advertising revenues that accounted for 98.4% of total revenues in fourth-quarter 2018.
The company intends to cash in on the ever-increasing trend of video viewing on social media platforms. Advertisers prefer video advertisements, as these appear to be the most lucrative medium to attract the audience.
Video-supported ad revenue growth is anticipated to be a key catalyst in first-quarter 2019, which Facebook is set to report on Apr 24.
Click here to know how the company’s overall first-quarter performance is likely to be.
Watch’s Growing Adoption: Key Catalyst
Facebook Watch’s growing traction is expected to drive video advertising revenues. The company has stated that more than 400 million people use Watch every month and spend more than 20 minutes on average on Watch daily.
Moreover, the addition of the co-viewing feature “Watch Party,” which enables group members to watch videos together and interact among themselves, enhanced social viewing and user interactions, thereby increasing the time spent on the platform.
Facebook stated that since its launch in August 2018, more than 12 million Watch Parties have taken place in the Groups alone. Additionally, Watch Parties generate 8 times more comments than regular videos in Groups.
Facebook, Inc. Revenue (TTM)
Facebook, Inc. Revenue (TTM) | Facebook, Inc. Quote
Additionally, the launch of the “on TV” feature in March is expected to have boosted user engagement. Further, expanding content portfolio, including original shows and live sports events, is expected to have aided user base in the to-be-reported quarter.
Facebook’s inked deals with the likes of UEFA, Major League Baseball (MLB) and La Liga (for football matches in Indian subcontinent) are key catalysts. These are expected to keep users glued to the platform, as companies like Twitter TWTR and Amazon AMZN are also betting big on live sports.
Ad Overhaul to Boost Trust
Undoubtedly, videos are playing a big role in strengthening Facebook’s social media dominance. However, the social giant faced criticism and flak for streaming videos on sensitive issues, including the New Zealand mosque shooting.
Facebook is working to strengthen its AI-based detection system that is expected to automatically block videos on sensitive issues.
Moreover, the company has agreed to overhaul its paid ad platform to stop discrimination and harmful practices in housing, credit and employment advertisements.
Although the overhaul is not expected to have material impact on first-quarter results, it may have boosted Facebook’s trustworthiness among users.
Expanding Portfolio: Game Tab, Instagram Checkout, Oculus Rift S
Facebook added a gaming tab in the main navigation section of its core app in the quarter. Per TechCrunch, the new tab will help users find games and gaming groups they follow, and also new content. The tab is built on Fb.gg, Facebook’s online gaming hub that was launched in 2018.
The new rollout is expected to strengthen Facebook’s foothold in the gaming space that is currently dominated by Twitch and Alphabet’s GOOGL Youtube.
Moreover, the company is gearing up to bring e-commerce on Instagram. Facebook is reportedly testing a shopping feature known as Checkout with Nike NKE. The company is also expected to partner with Shopify SHOP.
Additionally, Facebook unveiled Oculus Rift S that is priced at $399, which will be available sometime during spring. The new device co-designed by Lenovo has embedded sensors instead of external cameras for tracking.
The aforesaid initiatives diversify and expand Facebook’s portfolio. Although they are not expected to have any significant impact on first-quarter 2019 earnings, the efforts surely reflect the company’s strategy to explore alternative revenue source apart from ads, wherein it is facing tough competition from Alphabet division Google and Twitter.
Facebook carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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