"Video is at the heart of all our services," said Facebook CEO Mark Zuckerberg in a letter to shareholders two days ago, alongside the social network's earning announcement. Facebook earnings blew past Wall Street estimates, sending its stock soaring 7% to a record high.
This echoed his earlier comments predicting that "most of Facebook" would be video before 2020. In fact, the timeline appears to have been shortened since, with Facebook's head of ad product Ted Zagat later saying that this would happen in a "year or two." Zagat added that Facebook also was investing heavily in virtual reality, which it saw as the next step.
The past year has seen the launch of several live streaming apps, including Facebook's Facebook Live. But there are others: Twitter Inc. says users watch 110 years' worth of live video every day on Periscope, while Snapchat's users watch 10 billion videos every day, helping the company book an estimated $1 billion in annual ad sales. And YouTube Inc. -- afraid of being left out of this new generation of video applications -- is set to launch its own live streaming app, YouTube Connect. Social media is embracing video, and in ways and volumes never before seen.
But is it sustainable? The web has been a channel for a lot of free services, but revenue has been harder to find. Only a handful of these businesses have been able to survive. Is there reason to believe this form of social video will be sustainable?
Facebook's results would suggest that this is the case. Revenue was up 59% to $6.44 billion, against estimates of $6.02 billion. Facebook didn't break out video revenue specifically, but Zuckerberg did say, "We're particularly pleased with our progress in video," in the same shareholder letter. Facebook Live and 360 Video are increasing user growth and engagement, according to analysts, and they see video ads bolstering revenue as marketers adopt video, especially on mobile devices. Mobile accounted for approximately 84% of Facebook's Q2 revenue, up from 76% in the year-ago period.
Research from marketing technology company Kenshoo found that spend on social advertising increased nearly 50% year-on-year in the second quarter of 2016. Video attracted greater interest: it accounted for 19% of all paid social spend and impressions, compared with 8% in Q2 of the previous year. And in an RBC Capital/AdAge survey of nearly 2,000 ad professionals, 69% said they were already buying video ads, or were very or somewhat likely to buy them.
If social video, virtual reality and live streaming are set to grow we really would be "entering this new golden age of videos online," as Zuckerberg has stated. Live-streaming specially could have significant implications for operators already weighed down by growing quantities of high-quality OTT video, video communications applications, and more traditional user generated videos on YouTube and other platforms.
From an operator's perspective, one of the advantages of user-generated video has been that it is usually bite-sized. Services like Netflix have been far more problematic because the content is in 30-, 60- or even 90-minute units. This makes the average session considerably longer than on YouTube.
But live streaming could result in much longer sessions. In a recent, highly publicized event, the Democrats in the US House of Representatives stayed overnight protesting a stalled vote on gun control. This event became a showcase for Facebook Live and Periscope when the Speaker ordered TV cameras on the floor to be turned off, and the protesting representatives simply live-streamed events from the floor on their mobile phones. This went on for more than 24 hours.
In fact, live-streaming threatens to combine the volume of user generated videos with unprecedented session duration. More than a third of Snapchat's daily users create Live Stories, broadcasting photos and videos from their lives.
To add to the length of videos, you also have the unpredictability of any social app. Sudden interest in a piece of content, as with the gun control sit-in, can result in massive viewing spikes. This viral quality can mean huge, completely unexpected bursts in network traffic.
And it won't just be spikes in downstream traffic, but upstream as well. Because if there is an event in a crowded place, everyone there will be trying to film and share it on their mobile devices. Upstream capacity is more of an immediate problem, as there's usually more bandwidth built-in for downstream traffic in a network than there is for upstream.
Video quality will probably comparatively low in the short term, which means smaller files for operators to deliver. But in the longer term, 4K will become more prevalent, even for mobile communications and live streaming. And virtual reality will add a whole new layer of complexity and bandwidth requirements.
That would really be the perfect storm from a network management perspective.
— Aditya Kishore, Practice Leader, Video Transformation, Telco Transformation