Facebook Audio

Tuesday 27 April 2021

Portfolio insights

Share this

Facebook is a fast follower of nascent technologies and online services as they start to gain widespread adoption by consumers. Its playbook is to identify apps and features internet users enjoy, develop a version for its own platform then use its scale to reach billions of users.

Sometimes the new ventures pay off in a big way and other times they fizzle, though Facebook has minimal downside in rolling out new features to stave off emerging threats. Instagram ‘Stories’ is a well-documented and successful response to Snapchat’s competitive threat while ‘Reels’ appears to be challenging TikTok’s supremacy, though competition remains fierce. By contrast, its ‘Hobbies’ and ‘Dating’ responses to Pinterest and Tinder are yet to gain any meaningful traction.

Online audio services took off last year as the pandemic generated global lockdowns and work- or school-from-home. Many tech startups and smaller players such as Zoom quickly grew their user bases, and larger platforms were quick to release their own offerings to compete. While late to the party, Facebook announced it is developing its own suite of audio-related features this month.

Live audio rooms and podcasts

Virtual rooms will host live chats, similar to rival offerings such as Clubhouse and Twitter’s new ‘Spaces’ feature. Aside from Facebook’s scale benefits, its ‘Groups’ feature provides an ideal site for content creators to facilitate interactions and nurture relationships with their community of listeners outside live and recorded events. Facebook’s deep knowledge of users’ interests and preferences will likely optimise the experience for both creators and users.

Audio feed

Like its Newsfeed function, the audio feed will be based on each user’s social graph, using algorithmically determined audio snippets which they have named ‘Sound Bites’ to sort and prioritise feeds based on the user’s known interests and preferences. The clear advantage here is Facebook’s knowledge of its users.

TikTok went viral globally by executing a similar strategy using short-form video clips while offering video editing tools and monetisation options for content creators through its ad-supported platform. Facebook is developing impressive audio creation tools and providing access to an extensive music catalogue for creators to use in their audio compilations. Its aggregation of billions of users globally enables content creators to use the scale and reach of its global platform to generate lucrative monetisation opportunities.

Changing user habits

The unanswered questions are whether consumers will use the largely visual platform they know to consume audio content, and can Facebook successfully compete with the audio giants such as Apple Music and Spotify which deliver the overwhelming share of audio entertainment.

Facebook’s platform provides some clear advantages and if it can offer a seamless and convenient user experience in audio, it may make a compelling argument for content creators to migrate to its platform, though a change in consumer habits and behaviour is a necessary precursor for success. Users clearly preferred their experiences on Pinterest and Tinder, impeding takeup of Facebook’s Hobbies and Dating services.

Spotify’s strength in audio has been increasing steadily, and it is expected to become the largest streamer of podcasts in the US this year according to eMarketer, surpassing Apple for the first time. The two companies account for the lion’s share of online music and podcast consumption, and  Facebook will need to provide a more compelling experience for users to change their current habits and leave either platform.

Source: The Podcast Host
ThePodcastHost.com reports just over half the US population has actually listened to a podcast. This gives Facebook an opportunity to reach new users through free trials and recommendations and once they adopt the new medium, users may remain on Facebook’s platform over the longer term. Further, once a podcast is recorded, it is in the creator’s best interests to distribute the content across all available channels to maximise their reach and ultimately, monetisation.

Even if it remains a smaller competing service to the leading incumbents, Facebook will likely develop new opportunities for content creators and further entrench its users on the platform.

About the Author
Swell Investment Team

Swell Investment Team

Members of the investment team contributed to this article.