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Tech giants battle over video

Facebook adds a new feature to Instagram in a direct challenge to Twitter's Vine app.

June 20, 2013|By Jessica Guynn, Los Angeles Times

MENLO PARK, Calif. — With the Internet crawling with tempting new distractions, Facebook Inc. is fighting for every last second of people's attention.

And Thursday, it took dead aim at one of its competitor's hot new products: Vine. Owned by rival Twitter Inc., Vine is a video-sharing app that lets anyone create six-second videos that run on an endless loop.

Facebook introduced a potent weapon in this high-stakes battle over short-form video. In a splashy event with Chief Executive Mark Zuckerberg on hand, Facebook said Instagram would add the ability to shoot and share short videos on iPhones and Android phones.

The new feature on Instagram, the popular photo-sharing app that Facebook bought last year for more than $700 million to stay connected with teens and young adults, lets users record up to 15 seconds of video, enhance it with 13 filters and post it immediately to Instagram or Facebook.

"What we did to photos, we just did for video," Instagram co-founder Kevin Systrom said during a news conference at Facebook's Menlo Park, Calif., headquarters.

With short-form video, Facebook is betting this new medium will help keep its 1.1 billion users glued to Facebook on their mobile devices. And that could be welcome news for Facebook investors disappointed by the stock's lackluster performance and looking for hopeful signs that Facebook will soon kick-start sales growth.

Video is one of the fastest-growing segments of online advertising, with revenue in the U.S. expected to surpass $4 billion this year, according to research firm EMarketer. YouTube, owned by Google Inc., has already shown just how lucrative long-form video can be, generating billions of dollars each year in advertising.

Facebook is planning on rolling out video ads in the fall. That's when it's planning on going after the big kahuna of advertising: the money now spent on television ads, which fetch far more than online ads. With 15-second videos, the length of a TV spot, Facebook could lure more ads from TV, analysts said.

Instagram does not accept advertising and doesn't plan to any time soon, Systrom said. But he expects celebrities and brands to use video on Instagram much the way they use photos: as an effective way to get their message out and enhance their public image.

Classic British retailer Burberry, for instance, has nearly 850,000 followers on Instagram and posts photos from its fashion shows. Systrom said he expects Burberry to now post behind-the-scenes video footage too.

Video could present a significant opportunity to make money from consumers on mobile devices as they drift away from traditional bits of text and static images, S&P Capital IQ analyst Scott Kessler said. Facebook gets 30% of its advertising revenue from mobile devices.

"We see video as a substantial opportunity for Instagram and Facebook, and believe the new video service and features will contribute to growth in users and engagement," Kessler said. "We also see notable related monetization opportunities."

Sterne Agee & Leach analyst Arvind Bhatia said the announcement is "the first step toward monetizing Instagram."

"Over time, we see video ads on Instagram as well as within Facebook's News Feed," Bhatia wrote in a research note. "We believe these 15-second videos could prove quite effective and lucrative."

As in many other things, Facebook is a follower when it comes to tapping into the popularity of shooting short videos on mobile devices. Vine was the first to make short-form video more accessible and more social.

Twitter bought Vine in October and debuted the video-sharing app in January. Vine already has more than 13 million registered users who collectively share millions of videos each day, rivaling the swift rise of Instagram. Vine videos have been made by the White House, promoters of summer movie blockbusters and major brands.

Now Instagram is looking to muscle in on the action. It has come up with a couple of new features that Vine does not have, such as the ability to delete portions of a video and record them again. It also added a feature that stabilizes video shaky from hand-held recording.

Adding video will only heighten Facebook's competition for marketing dollars with Twitter, which quickly dubbed the new Instagram video feature "Vinestagram."

Facebook is well positioned to benefit from the new video-making tool. Video is one of the top draws on Facebook. Research firm ComScore says Facebook was the second-biggest U.S. online video site in May, with 60.4 million unique viewers watching 727.4 million videos in the U.S. alone, second only to YouTube.

Altimeter Group analyst Brian Solis says Instagram may have a shot at doing for video what its arch-rival has only begun to do: put the new art of short-form video in the hands of millions of people the world over.

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