Facebook wants to spread budget across more publishers
Last year, Facebook (FB) introduced news programming to its Watch video service. The company funds outlets such as CNN and ABC News to produce original news shows for Watch. Facebook has a budget of $90 million for funding production of news content, according to a report from The Information. To do more with its $90 million news content budget, Facebook is bringing more news publishers on board and reducing the amount it spends on individual shows, according to a report from Digiday. At the same time, Facebook has explored canceling shows that don’t deliver the returns it wants. As a result, the company has informed publishers that it will only renew a third of existing shows that it pays for, the report said.
Soaring costs put pressure on margins for Facebook
Canceling non-performing news programs and reducing funding for individual shows signal that Facebook is beginning to question its spending on video content, and that may be because the company wants to control costs. Facebook’s operating expenses soared 62% YoY to $9.1 billion in the fourth quarter, which ended in December. With costs rising twice as fast as revenue, Facebook’s operating margin dipped to 46% from 57% a year earlier.
Expenses rose 26% YoY for Google parent Alphabet (GOOGL) and 18% YoY for Amazon (AMZN) in the December quarter. Twitter (TWTR) and Yelp (YELP) reported 13% and 8.5% YoY increases in operating expenses, respectively, in the December quarter.