Facebook Inc. Is Starting to Look a Lot Like YouTube

By Markets Fool.com

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Source: Facebook

It's no secret that Facebook has been pushing its users to upload more videos. Just over 30 million of those users are small businesses that use Pages to create a presence on the social network and connect with customers. Facebook highly encourages those users to upload videos to gain additional exposure.

Now Facebook is giving them yet another reason to upload videos after overhauling its Pages product to showcase videos. The new design is very similar to Google's YouTube Channel design, even offering the option for businesses to feature a video at the top of the page and make playlists.

The move to change Pages -- which TechCrunch reported Facebook is testing and plans to roll out widely in the coming weeks -- comes along with reported attempts by Facebook to attract top YouTube talent as well as a new deal with the NFL to show NFL videos in users' Newsfeeds. Facebook is rapidly becoming more attractive to online video producers as it figures out ways to engage its users and monetize its video content.

If it ain't broke, don't fix it
YouTube is far from broke. The video site is expected to bring in over $1 billion in net video ad revenue in the U.S. this year. Last year, estimates for the site's global ad revenue topped $5 billion.

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In an attempt to emulate YouTube's success with video advertising, Facebook has started emulating YouTube's product. It's signing current YouTube stars to contracts that make the social network the exclusive home of new content for a period of time. It added a view counter to videos a few months ago. Now its updated Pages layout looks almost exactly like YouTube Channels. All of these things make Facebook look a lot like YouTube.

Facebook's video views topped 1 billion per day by September. With CEO Mark Zuckerberg noting video will be a big focus going forward, that number should continue to climb.

Making its own $5 billion video business
Despite the growth in video content and views on the platform, Facebook still has some work to do to capture the growing amount of video ad spending. Over the next four years, digital video ad spending in the U.S. is expected to more than double, which leaves plenty of time and opportunity for Facebook to monetize all of the video content it's attracting.

Currently, Facebook requires a $600,000 minimum ad spend for video ads, and they're stand-alone ads that pop up in Newsfeeds just like static display ads. That number should decline as Facebook users get used to the video ads, but the vast majority of videos on the platform produce $0 for Facebook.

Facebook's current test with Verizon providing post-roll ads on NFL highlights represents one potential path to grabbing a larger share of digital video ad spending. Facebook's ad chief said he's uninterested in showing pre-roll video ads, which have produced the majority of YouTube's video ad revenue.

Figuring out how to tap into user-generated videos to produce revenue is key to increasing its share of the video ad market and attracting new content creators looking to earn money on top of the increased exposure Facebook can provide.

Can Facebook grow as big as YouTube?
Facebook already has a few advantages over YouTube when it comes to publishing content, but one area where YouTube is well ahead of the competition is in helping "partners" make money with their videos. At the same time, YouTube helps itself to a percentage of the revenue.

While Facebook can make cosmetic changes and spend money to attract video producers to the platform, the only way its video business can actually grow is by figuring out how to monetize user-generated content. With targeting data on par with Google's, once it figures out how to get people to watch ads, Facebook should be able to generate revenue for producers at the same level as YouTube.

Facebook has overcome advertising challenges in the past, and I think video represents a challenge the company is quite capable of overcoming as well. Once it figures out video advertising, Facebook should have no problem meeting the same level of video ad revenue as YouTube, generating billions of dollars in additional revenue.

The article Facebook Inc. Is Starting to Look a Lot Like YouTube originally appeared on Fool.com.

Adam Levy has no position in any stocks mentioned. The Motley Fool recommends Facebook, Google (A shares), Google (C shares), and Verizon Communications,. The Motley Fool owns shares of Facebook, Google (A shares), and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.