Can Facebook Inc Overpower YouTube?

By Markets Fool.com

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Facebook now shows 3 billion videos per day. Source: Facebook.

It took YouTube six years to reach 3 billion video views per day. Facebook did it in about a year. Of course, Facebook had the benefit of building on top of the world's largest social network and some questionable policies regarding what counts as a video view. Still, YouTube ownerGoogle can't ignore Facebook's sudden impact on the short-form online video market.

Despite almost no means of monetizing videos uploaded directly to Facebook, the social network is attracting new productions from some of YouTube's biggest channels. That's because Facebook offers a key benefit over YouTube despite a lack of financial opportunities.

Exposure is a powerful currency
The Young Turks -- one of YouTube's most popular news channels -- just developed a new series aimed exclusively at getting more people to share its content on Facebook. Facebook is built around sharing content, and that is its biggest advantage over YouTube.

While Google makes sharing a YouTube video on any social network pretty simple, it can't beat Facebook's one-click solution. Any amount of friction in the process reduces the number of shares.

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That might be why the first episode of The Young Turks' Final Judgement had 56% more views on Facebook than on YouTube two days after its simultaneous release on both platforms. The second episode had even more views than the first on Facebook, and more than three times the number of views than on YouTube.

Of course, Facebook is much more flexible about what constitutes a viewthan is YouTube. Since Facebook autoplays videos in users' News Feeds, it counts a video view after 3 seconds of the video playing. YouTube requires a viewer to click a link to the video. Facebook still provides data to the creators regarding how many viewers made it 25%, 50%, 75%, and 100% through a video.

Will Facebook ever figure out monetization?
The Young Turks development is exciting for Facebook investors because it shows the company can attract top talent to its video platform despite lacking several key features that make YouTube appealing. The attraction is based purely on the size of its network and its ability to provide exposure.

Native videos provide value to Facebook even if it is not displaying ads with them. Embedded videos keep Facebook users on Facebook instead of sending them to YouTube or some other competitor. That increases both the time spent on Facebook and the number of static display ads the company can show users.

Still, the real money is in video ads. YouTube last year generated an estimated $1.1 billion of net video ad revenue in the U.S. alone. That's not a lot for Google, but it's 9% of Facebook's total revenue in 2014. Digital video ad spend in the U.S. is expected to more than double from the 2014 level by 2018.

Facebook ran an experiment with the National Football League to run Verizon Wireless commercials after NFL highlights during the playoffs. The results of the experiment are unclear, but look for Facebook to continue working on ways to monetize its video content.

Investors hoping for Facebook to figure out video monetization will have to have faith in CEO Mark Zuckerberg and his team -- just as they did when Facebook was trying to figure out how to make money from mobile users. The difference is that the company's entire business doesn't rely on monetizing its video viewers as it did for monetizing mobile users.

Finding an effective way to monetize its video content could boost Facebook's video ad revenue exponentially. Not only would its video ad inventory instantly grow, the potential for revenue sharing with publishers would attract more video uploads. That remains a future possibility, however, with no clear indication that the NFL experiment produced satisfactory results.

But even if Facebook never figures out a great way to monetize its video content, it provides value to video producers looking to gain added exposure to their Web series. That's bad news for YouTube, which is used to receiving significant traffic from Facebook.

The article Can Facebook Inc Overpower YouTube? originally appeared on Fool.com.

Adam Levy owns shares of Apple. The Motley Fool recommends Apple, Facebook, Google (A shares), and Google (C shares). The Motley Fool owns shares of Apple, 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.