T E C H N O L O G Y 2 20 Edited by Jeff Muskus ● The company’s lackluster video tab still has a lot to prove to both viewers and advertisers Three long years ago, when the world knew little about Cambridge Analytica and laughed off the specter of fake news, Mark Zuckerberg had a very different kind of problem. Facebook wasn’t adding many users in key ad markets, so it needed to fig- ure out how to wring more money from its existing audience. Although the company accounted for an impressive 45 minutes of its average user’s day, that wasn’t in chunks big enough to send them the ever-growing number of ads at the heart of the company’s business model. The average Facebook session lasted less than 90 seconds, according to people familiar with the matter—while you were waiting in a checkout line, trying to avoid eye con- tact between subway stops, or sitting on the toilet. Zuckerberg and other executives decided to try to boost that number by pushing their way into a much older kind of advertising model: TV. Like a lot of ILL U S T R A T IO N B Y J O N A T H A N D J O B N K O N D O ; D A T A : T D G R E S E A R C H , 2 0 18 P O L L Bloomberg Businessweek February 4, 2019 Facebook Watch Isn’t Living Up to Its Name ◼ TECHNOLOGY Bloomberg Businessweek February 4, 2019 21 things at Facebook these days, it’s not going great. You’re probably not watching much Facebook Watch. The company committed about $1 bil- lion last year to buying shows for its stream- ing video tab, reasoning that even a single hit could leech a significant piece of the average two hours Americans spend in front of the TV, or the Facebook-level amount of time they spend on Google’s YouTube. It hasn’t produced a hit like the Netflixes, Amazon Primes, and Hulus of the world. So far, some of its biggest names have been network castoffs (MTV’s Loosely Exactly Nicole) and refugees from other streaming services (Comcast Watchable’s I Want My Phone Back). When Facebook reported its quarterly earnings on Jan. 30, investors and analysts were mostly listen- ing for news about ad sales for its messaging apps and the stories feature it copied from Snapchat. (Bloomberg Media produces a show funded by Facebook for the Watch platform.) While researcher EMarketer estimates that Facebook as a whole will take in nearly double YouTube’s $4.3 billion in video ad sales this year, it expects Watch to account for a single-digit percentage of that figure. “I don’t think it’s yet become a must-buy for brands,” says Abbey Klaassen, chief marketing officer at New York mar- keter 360i. “They are in a stiff competition for this kind of advertising and inventory.” Last summer, a year after Watch went live in the U.S., half of consumers hadn’t heard of it and three- quarters hadn’t used it, according to media researcher Diffusion Group. “I think we’re making a ton of progress,” says Matthew Henick, Facebook’s head o.

1. T
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Edited by
Jeff Muskus
● The company’s lackluster
video tab still has a lot to prove
to both viewers and advertisers
Three long years ago, when the world knew little
about Cambridge Analytica and laughed off the
specter of fake news, Mark Zuckerberg had a very
different kind of problem. Facebook wasn’t adding
many users in key ad markets, so it needed to fig-
ure out how to wring more money from its existing
audience. Although the company accounted for
an impressive 45 minutes of its average user’s day,
that wasn’t in chunks big enough to send them the

2. ever-growing number of ads at the heart of the
company’s business model. The average Facebook
session lasted less than 90 seconds, according to
people familiar with the matter—while you were
waiting in a checkout line, trying to avoid eye con-
tact between subway stops, or sitting on the toilet.
Zuckerberg and other executives decided to try to
boost that number by pushing their way into a much
older kind of advertising model: TV. Like a lot of ILL
U
S
T
R
A
T
IO
N
B
Y
J
O
N
A
T
H
A
N

3. D
J
O
B
N
K
O
N
D
O
; D
A
T
A
: T
D
G
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S
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A
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4. H
, 2
0
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P
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Bloomberg Businessweek February 4, 2019
Facebook Watch
Isn’t Living
Up to Its Name
◼ TECHNOLOGY Bloomberg Businessweek February 4, 2019
21
things at Facebook these days, it’s not going great.
You’re probably not watching much Facebook
Watch. The company committed about $1 bil-
lion last year to buying shows for its stream-
ing video tab, reasoning that even a single hit
could leech a significant piece of the average
two hours Americans spend in front of the TV,
or the Facebook-level amount of time they spend
on Google’s YouTube. It hasn’t produced a hit

5. like the Netflixes, Amazon Primes, and Hulus of
the world. So far, some of its biggest names have
been network castoffs (MTV’s Loosely Exactly
Nicole) and refugees from other streaming services
(Comcast Watchable’s I Want My Phone Back).
When Facebook reported its quarterly earnings on
Jan. 30, investors and analysts were mostly listen-
ing for news about ad sales for its messaging apps
and the stories feature it copied from Snapchat.
(Bloomberg Media produces a show funded by
Facebook for the Watch platform.)
While researcher EMarketer estimates that
Facebook as a whole will take in nearly double
YouTube’s $4.3 billion in video ad sales this year,
it expects Watch to account for a single-digit
percentage of that figure. “I don’t think it’s yet
become a must-buy for brands,” says Abbey
Klaassen, chief marketing officer at New York mar-
keter 360i. “They are in a stiff competition for this
kind of advertising and inventory.” Last summer,
a year after Watch went live in the U.S., half of
consumers hadn’t heard of it and three- quarters
hadn’t used it, according to media researcher
Diffusion Group.
“I think we’re making a ton of progress,” says
Matthew Henick, Facebook’s head of content strat-
egy and planning, who just pitched the service to
advertisers at this year’s CES, the annual consumer
electronics show in Las Vegas. He’s making the
case that a product more like TV or even YouTube,
where people choose what they’re watching more
than they do scrolling through Facebook’s news
feed, makes it easier to target them with ads.
Seventy-five million people use Watch every day,

6. Henick says. About 1.5 billion use Facebook daily.
The stakes are higher for Facebook than they
were a few years ago. This past July, the com-
pany warned investors to expect slowing revenue
growth and narrower margins over time, because
it’s already signed up most humans with an internet
connection, its service has fundamental problems
that would be very costly to fix, and it’s spend-
ing a lot on initiatives like Watch. The announce-
ment wiped out a record-breaking $120 billion
of Facebook’s market value in a day. All told,
the company lost 26 percent of its value in 2018.
It’s perhaps less of a surprise, then, that
Watch is so thirsty. An annoying, persistent red
notification dot over the Watch icon on Facebook’s
home screen produces an itch-you-can’t-scratch
feeling, one that isn’t much alleviated by the thin
lineup if you do click through. The videos start
playing automatically—allowing Facebook to
bolster its statistics but without helping its case
to advertisers that people are watching them
intentionally. And the tab is packed with adver-
tising, including banner ads that appear below
videos while they’re playing and, in some cases,
pre-roll ads that play before they start.
This wasn’t quite what Zuckerberg had in mind
back in 2016. He considered Watch a direct com-
petitor to YouTube, which in some markets was
starting to beat Facebook in terms of time spent,
says a person familiar with the matter. When
Watch was conceived, the CEO insisted, among
other things, that there be no pre-roll ads, espe-
cially given how short the sessions on Facebook

7. tend to be, according to another person familiar
with the matter.
Now Facebook and its advertisers are tak-
ing a kitchen-sink approach to Watch revenue,
including making branded videos and selling
subscriptions, as the company struggles to per-
suade people to lounge with its social network at
night. “We just haven’t figured out how to make it
a superpower of ours,” Henick says.
Watch can still be successful if Facebook hews
to a modest view of what success looks like—
snatching ad dollars from cable and YouTube on
the margins. Unlike big spenders such as Netflix,
Facebook has said it doesn’t intend to pay upfront
for shows in the long term. Its idea is that shows
will be able to attract enough viewers on Watch so
that the producers’ share of Facebook ad revenue
will account for their compensation.
That’s assuming, of course, that people are
watching. Facebook still has a lot to prove on that
front, says Jeff Ratner, chief media officer at ad
agency iCrossing. “It’s been up and running for
a while now, but there’s no indication it’s getting
major traction from users,” says Ratner. And as
Mark Wagman, a managing director at consult-
ing firm MediaLink, notes, even Facebook can’t
coast on its size if it can’t differentiate itself from
all the other streaming TV options online. The
big question for advertisers, says Wagman: “Am I
buying into something I can’t get anywhere else?”
�Sarah Frier, with Gerrit De Vynck
● Awareness of

8. Facebook Watch
among Facebook users
Never heard of it
50%
Heard of, never used
24%
Use it
20%
Use it daily 6%
THE BOTTOM LINE A year and a half in, Facebook Watch,
the
company’s would-be YouTube killer, is a jumble of ads with no
hit
shows and a tiny slice of overall video revenue.
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