Internet superpower Facebook.com is adding a video service similar to YouTube’s on their site. Facebook, already accounting for approximately 20% of time spent online, is looking to expand its market share with this new video service. They are looking to have creatives produce high-quality content to upload to the site in return for a portion of the ad revenue. Facebook’s vast data on each user allows them to charge advertisers a much higher rate than other sites due to the ability to greatly personalize advertisements. A recent publicity stunt for the video game “Watchdogs” showed just how much information could be drawn from a Facebook profile.  They created a Facebook app and with the information collected, could tell users when and where they could be found, who they are likely to be with, interests, and a variety of other personal data. Should Facebook continue this push, they are likely to see a great deal of competition with YouTube, the current dominating ad-supported video site. The extent of the rivalry can be seen in a Porter’s Five Forces analysis I have created below.

As you can see from the analysis, there is a huge level of competitiveness in the online video industry. With the websites all offering very similar products usually for free, customers may switch services based on convenience. Customers only having to frequent one site for their video and social needs may be all Facebook needs to gain an advantage against YouTube, especially with a switching cost of virtually zero. While YouTube will still be a dominant video site for many years to come, they will see a decrease in traffic over time as Facebook goes forwards with this emerging new service.