Facebook Inc (NASDAQ:FB) stock is up 38% over the last year, hovering near its all-time high. FB stock is now valued at $333 billion and it’s hard to imagine a company that big having a lot more upside. But Facebook has several catalysts in the works that can further boost FB stock. Let’s talk about one of them.
It’s no secret that Facebook is pushing big into live streaming video. Over the last few months, Facebook CEO Mark Zuckerberg has been redirecting internal resources to focus on “Live,” the company’s streaming video service that lets people broadcast video to friends on the site. (Source: “Mark Zuckerberg Is ‘Obsessed’ With Livestreaming, Making Live a Top Priority at Facebook,” Re/code, February 26, 2016.)
According to one source inside the company, Zuckerberg is “obsessed” with getting Live to work. (Source: Ibid.) During a recent town hall–style Q&A, Zuckerberg described the Live product as “one of the things I’m most excited about.” (Source: Ibid.)
In case you haven’t noticed, there are probably a lot more videos that clog up your Facebook newsfeed than a year or two ago. Facebook rolled out Live last summer and initially only let celebrities like Dwayne “The Rock” Johnson broadcast live streaming videos onto user’s feeds.
Live recently expanded to all U.S. “iOS” and “Android” users, and just last week, Facebook announced that it’s adding a whole host of new features that will be rolling out to users over the next few weeks. Among the new features: the ability to use Facebook Live to broadcast videos in groups and events, the ability for users to give feedback over live video broadcasts in real time using a set of new “Live Reaction” emojis, and the ability to invite friends to a Facebook Live broadcast.
The added features are all part of Facebook’s plan to get its users to use Live more. Facebook wants Live to work so much that the company is even offering financial incentives to big media companies and celebrities.
According to Re/code, Facebook is paying The New York Times, BuzzFeed, and The Huffington Post, among many other publishers, to stream content on Live. (Source: “It’s Not Just Celebrities — Facebook Is Paying Media Companies to Make Live Video, Too,” Re/code, April 6, 2016.)
Facebook is also building up a list of celebrities using Facebook Live by offering to pay talent to commit to regular broadcasts in an effort to build up content. Facebook says it’s not offering huge sums of money and that the amount will be based on how much time each celebrity is willing to commit. (Source: “Facebook Exec Clears the Air Over NFL, Celeb Deal Talks for Live-Stream Push,” Variety, March 7, 2016.)
In the long term, Facebook says it will enter into revenue sharing agreements with celebrities and media partners that stream on Facebook Live, either through in-video ads or some other form of monetization. (Source: Ibid.)
So what is with Facebook’s obsession with video?
Facebook wants us to spend more time on the site, increasing the potential to serve up more advertising. Live video is the perfect way to do that. Facebook says that users watch live broadcasts three times longer than recorded video. (Source: Ibid.)
Video also has the potential to give a huge boost to the social media giant’s revenue beyond its static ads on users’ newsfeeds. Online video advertising is growing quickly and Facebook is trying to take advantage of this trend by incorporating more video to bring in more ad dollars.
Research firm eMarketer estimates that online video ad sales will reach $14.77 billion, up significantly from the $7.46 billion in spending in 2015. (Source: “US Digital Display Ad Spending to Surpass Search Ad Spending in 2016,” eMarketer, January 11, 2016.)
Facebook has a major advantage in capturing a huge part of the market—it has a massive audience of 1.6 billion monthly active users. That is an advertiser’s dream.
The Bottom Line on Facebook Stock
Mark Zuckerberg believes that videos are going to dominate the social media platform. He recently told BuzzFeed News that he “wouldn’t be surprised if you fast-forward five years and most of the content that people see on Facebook and are sharing on a day-to-day basis is video.” (Source: “Why Facebook And Mark Zuckerberg Went All In On Live Video,” BuzzFeed News, April 6, 2016.)
If that happens, FB stock should have a lot more upside left in it.