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Facebook's media strategy could lead to short term weakness .. Here's why....

Research house Edison produced a note on Facebook today....
Facebook's media strategy could lead to short term weakness .. Here's why....
Facebook is targeting broadcast shows for its media strategy..

Social media giant Facebook Inc (NASDAQ:FB.) is likely to grow slower than the market expects due to its targeting of broadcast media, reckons research house Edison.

Can't compete with Netflix or YouTube..

Facebook is chasing broadcast targets and its content will not compete with the likes of Netflix (NASDAQ:NFLX) or YouTube (NASDAS:TUBE) - namely premium or user-generated.

Facebook has closed a deal for a reality TV show called Last State Standing and is close to doing a deal to shoot and air a second season of Loosely Exactly Nicole which originally aired on MTV, says analyst Richard Wilson.

"It is also commissioning shorter shows from the likes of Vox Media and Buzzfeed."

Nevertheless, broadcast TV is still an advertising market worth $70bn a year and it is the younger end of this market that Facebook is targeting, notes Wilson.

Broadcast TV is still an advertising market worth $70bn..

But he says: "The broadcast market represents a much softer target in our opinion as Facebook can add all sorts of interactive and social functionality on top to make the experience much more engaging than just watching TV."

"Given that Spotlight is not yet available in the app and that Facebook is just closing the deals to produce this content now, we do not expect these shows to hit Facebook until 2018.

"Consequently, for 2017, we see Facebook’s growth potential remaining hampered by the fact that it has already fully monetised the segments of Digital Life where it is already present. The result is likely to be a much slower growth profile, which is something that the market has still not fully anticipated.

Hence, we can see disappointments coming in the Q2 17 and Q3 17 results as the market adjusts to this more sanguine short-term outlook.

Facebook shares are up today 1.69% to $153.19.

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