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What's Behind Facebook's Big Push Into Video

In this MarketFoolery segment, host Mac Greer, David Kretzmann of Supernova and Rule Breakers, and Ron Gross of Motley Fool Total Income discuss the value of Facebook's (NASDAQ: FB) new approach to video. It's not just about the unique content; users could always see and share videos on their feeds, but up till now, searching for and finding what you were after -- a simple matter on sites like YouTube -- was not obvious or easy. Improving that should add to the already impressive "stickiness" of Facebook, which will translate to ad revenue down the road. Should rival platforms be worried?

A full transcript follows the video.

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Mac Greer: Facebook, making a big push into video. Facebook is adding a Watch tab that will include original video produced exclusively for Facebook. The Watch tab will feature personalized recommendations as well, and categories like "most talked about," "what's making people laugh," and "shows your friends are watching." David, what does it all mean for investors?

David Kretzmann: I think the interesting thing here is, this will really be the place that Facebook houses a lot of its original content. So there will be some live media, like its new deal with Major League Baseball -- they'll be showing one game a week. They have some original content from Mike Rowe, the former host of Dirty Jobs on Discovery. So they have a lot of different content that really runs the gamut here. It makes sense to house that content in one place.

At this point, video on Facebook -- it's not easy, I don't know if it's even possible to search for a video. I've never done that. Sometimes you'll see videos in the Facebook feed itself, but you don't go to Facebook as a destination saying, "I want to find and watch this video." Typically, for that, you'll go to YouTube or somewhere else. So I don't know if I necessarily see this as a direct competitor to YouTube. From what I've read so far about this announcement, it seems like it's mainly focused on that original content. But I'll be curious to see if they try to have this new feature house a lot of the users' content and things like that, and just make video in general more searchable and discoverable on Facebook, because up to this point, that hasn't been a focus, and they're clearly lagging YouTube on that front.

Ron Gross: Yeah. I like this. Anything to make Facebook more sticky, like the world needs more excuses to suck productivity out of their day. I'm on there as much as the next guy, and I think I like this. I do have a demographic question. Whereas I think YouTube is watched and searched by people of all ages, I think of Facebook as having lost the youngest of our generation, the younger kids, let's say. And I don't know if this gets some back. I don't think it does.

Greer: I don't think they ever had the youngest.

Gross: Right. But even teenagers and college-aged kids, I think for the most part, they'll do a little bit of posting, but they've left Facebook up to us older folks. Therefore, I question whether the videos that are produced or put on YouTube, will they have the same viewership? On YouTube, if you get something hot, you can have multimillions of viewers watching that video. I'm just concerned that Facebook's narrower -- is that a word?

Kretzmann: Why not?

Greer: I'll go with it.

Gross: Their narrower demographic could restrain that a bit.

Greer: But if this gets people to engage with Facebook for longer -- it's not so much that more people are coming to Facebook to watch videos, because to Ron's point, I don't think they are. But if you're spending more time on Facebook because of videos, this is a win, right?

Kretzmann: Yeah. Facebook is all about engagement and keeping people on that platform longer. I think video has been a focus on Zuckerberg's part for a while now. And this, I think, should be a more concrete, dedicated hub for that video content. It'll be interesting to see how this deal with Major League Baseball turns out. If you're going on Facebook to watch live sports, original shows, then it becomes even more of a destination as a platform, not only a place that you go just to blow off some steam and not be productive.

Greer: To that point, do you think this sets off even more of an arms race between Facebook, YouTube, Netflix, HBO? Does this up the ante for all of them? Or do you think, if you're YouTube, you're looking at this and saying, "Eh, I'm not really worried."

Kretzmann: I think you certainly need to pay attention to it. This really is a battle among platforms and ecosystems at this point. There's only 24 hours in a day and you're trying to capture as much of that from your respective users. YouTube's been doing some similar initiatives with their YouTube Red offering, where they have original content. They're paying some of their top creators and stuff. So you're seeing more of these companies, even Apple, push into original content. Still very early days. So I'm not really convinced on what strategy makes the most sense yet. But I think it makes sense for these companies to be testing that.

Gross: In the end, let's not forget, this is still all about advertising dollars. There's only a certain amount of advertising to go around, and there's only a certain amount of dollars that advertisers will pay for more eyeballs and stickier eyeballs. Obviously, you should be able to charge more for that, which is, I think, the game plan right here. But still, you can't have all the companies charging all the money for all the advertising. The math just doesn't work.

Greer: OK, guys. As we wrap up, I mentioned that one of the sections on Facebook's Watch tab is going to be "what's making people laugh." So how about one video or one type of video that you have to put in that section?

Kretzmann: I'm going to go with some inside baseball here. I'm going to go with the earthquake 2011 video, courtesy of Fool Lawrence Morrison. This is on YouTube, and I think it needs to be on Facebook, too. Maybe we can tweet it out or something.

Gross: Shout-out to Randy.

Kretzmann: Yeah, this is a legendary video that always makes me laugh.

Greer: OK, that's a bold call. Ron?

Gross: I like watching comedians, specifically anything Louis C.K. puts out, but there is a bit of schadenfreude, I'm going to say, on my part, because I also like watching the videos where people are falling and hurting themselves. [laughs] Nothing too bad. I don't want anyone going to the hospital, but I do like a good fall every now and again.

Kretzmann: The fail videos.

Greer: I love watching old concert videos, like the Eagles from 1971. I love watching that. And then my guilty pleasure -- it's not even guilty -- the video I love, my go-to make-me-laugh video is the video of the monkey riding the dog. And it's usually at a rodeo or somewhere. I think the monkey may even be wearing a bandanna. If that video stops being funny, then I'm dead.

Kretzmann: It's sort of like the video of the kitten riding the turtle. That's another one that always does it for me.

Greer: Oh, how solid. My favorite joke, once a month, I'll send my wife an email and say, "You have to check this link out," or "Here's a very important document," or "I don't know if you saw this bill," and it'll be the link to the monkey riding the dog, and she's got speakers in an office, and it's got the "Yakety Sax" music. Everything about the video is perfect.

Kretzmann: The secret to a happy marriage, following up on yesterday's episode.

Greer: It's impressive, and the monkey stays on the dog.

Gross: Of course. It wouldn't be funny -- well, it would be funny for me.

Greer: It would be funny for you.

David Kretzmann owns shares of Facebook and Netflix. Mac Greer owns shares of Apple, Facebook, and Netflix. Ron Gross owns shares of Apple and Facebook. The Motley Fool owns shares of and recommends Apple, Facebook, and Netflix. The Motley Fool has a disclosure policy.