Why is Facebook sitting out CTV?
Meta is going after TikTok. It is potentially leaving TV money - and OS control- on the table?
In the past week, two stories really grabbed my attention:
Netflix may want to buy Roku, or at least partner with Roku on its upcoming ad-supported launch
Facebook is planning its most significant changes in years, as it aims to start showing users far more content from people they don’t know. As The Verge’s Alex Heath reported, the company is desperate to emulate/blunt TikTok
These stories are not related per se. But it did strike me that when speculating about who else might want to snatch up Roku, my mind immediately went to Google, perhaps even Microsoft, or any of the other contenders looking to control the TV OS.
Facebook is never in that conversation. My questions is, why? And my other question is - maybe that’s the right move on FB’s part?
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Casey Newton of The Platformer asked a great question the other day - Can Meta manage two pivots at once? Indeed, Meta is trying to build an entirely new way of computing/internet with its investments in the Metaverse. And now it’s also trying to completely revamp what the current Web 2 Facebook is - as in, it’s no longer a newsfeed for your friends’ rants or kids pictures, but a place where you find all sorts of random would-be viral videos from strangers.
I’d throw in a third pivot here - that Facebook is trying to completely rebuild its ad system on the fly after its attribution model got decapitated by Apple. That’s a lot of reconstruction at once. The chances of getting all three right seems…less than 100 percent.
Which makes for a great argument to not even bother with the TV screen. If you can pull off a TikTok wannabe, well, there’s some great money there. eMarketer predicts that TikTok’s US ad revenue will surge by 184% this year to $8.75 billion. And Facebook’s user base is much bigger than TikTok’s (for now).
The thing is, TikTok’s audience is young and growing, while Facebook’s power users are people like my 70-something mom and aunt, who don’t seem to be looking for a discovery engine. We’ll see.
Plus, Facebook’s ad business is built around identity and driving/claiming credit for conversions. At least today, that’s not TikTok’s game.
Certainly, you could say the same thing about TV. It’s historically a branding vehicle that is in the process of becoming digital, while hoping for a more digital-like ad business. “If you look at the marketplace it is growing very healthily,” IAB CEO David Cohen told me on the latest episode of my Next in Marketing podcast. That ad spending growth is happening even as TV goes through “a tremendous re-architecture” while grappling with “legacy thinking.”
Too many brands and TV buyers are hung up on using TV to get cheapish mass reach, when the potential lies in focusing more on us TV to drive business outcomes.
“It takes us a long time to move the industry,” he said.
So if you’re Facebook, maybe you’d rather skip those headaches, and focus on creating and owning the next generation of computing.
However, the counter argument for that is, while the Metaverse is mostly theoretical, people watch loads of TV right now. A company like Facebook could take a more active role in shaping how ad-supported streaming plays out - maybe even make a play for driving TV’s operating system in a way that it simply can’t on mobile devices.
As for Facebook’s current video strategy, well Facebook Watch seems to have languished, as the leadership team is more focused on Reels and now the new TikTok shift. For some reason, I have the FB Watch app on my TV, but have never once used it. Yet, if Facebook ever gave people a reason to, the tech giant could exercise its strength in identity, attribution and targeting in ways that not many companies could in the CTV space.
This is where a Roku could come in. What if Facebook snatched the company up, leveraged its ad tech while making Facebook Watch, or Reels, or Instagram Stories a central part of its OS? This would require sparking a very different viewing habit for most people, but that’s where distribution power could be key. According to Protocol, Roku is rubbing a lot of the media industry the wrong way by throwing its weight around - because it can. That kind of power sounds right up Facebook’s alley.
Or Facebook could go another route, and purchase a TV manufacturer like Vizio or LG, and finally control a device soup to nuts like they’ve always wanted to in mobile.
Because it’s all about the operating system.
I’d still argue that if anyone buys Roku, it’s Netflix or Google. LightShed’s Rich Greenfield says that Netflix would be too conflicted if it were competing with the likes of NBCU to sell ads while also distributing NBCUs apps and selling NBCUs app inventory. That scenario would certainly be messy, but some of those deals could be rewritten. With Roku, Netflix would benefit from having a built in ad technology platform, a data-driven walled garden, and advertiser base as it looks to get its own ad business of the ground.
Meanwhile I think Google would love to snatch up a Roku, which it could use to both further extend YouTube and YouTube TV’s reach, while also finally getting a bigger piece of the overall TV ad market. Of course, I’m not sure regulator are inclined to let Google, Facebook, or even Netflix for that matter make an acquisition that smacks in any way of ad market consolidation.
So it may be just as well that Facebook sits CTV out. They just better be right about the other stuff.
Another reason why Netflix is unlikely to absorb Roku is that no one wants to get into the hardware business. It's why Roku has focused so much on the ad-tech side. It also doesn't help that Roku has a minimal reach outside the U.S., which is a problem for a company with global ambitions such as Netflix.