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Could Facebook’s Video Streaming Device Upset Roku?

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Facebook (FB) plans to enter the video streaming device market, reports Variety. It has reportedly approached Netflix (NFLX) and Walt Disney (DIS) to include their video services on its video device. Variety reports the device is to be part of Facebook’s Portal hardware brand.

Having Netflix and Disney onboard could help popularize Facebook’s video device. Netflix’s popular video streaming service boasts over 60 million subscribers in the US, and about 152 million subscribers worldwide. And with its new video service, Disney+, Disney aims to have as many as 90 million subscribers worldwide by 2024.

Video streaming devices present Facebook with attractive revenue opportunity

Roku (ROKU) currently dominates the video streaming device market, according to Strategy Analytics. Other big names in video streaming devices include Amazon (AMZN), Apple, and Google (GOOGL). Why would Facebook want to enter the crowded video streaming device market, where Roku and Amazon already have a wide lead?

Facebook is keen to diversify its business outside advertising, and the video device market looks attractive. The global market was worth $113.3 billion last year. Furthermore, ResearchAndMarkets predicts it’s on track to hit a massive $271.8 billion by 2024. Meanwhile, eMarketer forecasts the US digital ad market will be worth $201.8 billion by 2023.

Facebook may be late to video streaming devices but has potential

We believe entering the video streaming device market could significantly boost Facebook’s business diversification efforts. Ad sales contributed over 99% of Facebook’s total revenue in the second quarter. Less than 1.0% came from non-ad businesses, such as Portal smart speaker and Oculus VR headset sales. In comparison, Facebook peers Google and Twitter (TWTR) are more diversified. Advertising contributed 84% of revenue at Google parent Alphabet and 86% of revenue at Twitter in the second quarter.

Reaching over 6.0 billion consumers around the world through its family of social apps, Facebook has a huge market potential for video devices. Who knows, it may even present serious competition for Roku and Amazon.

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