Facebook
Facebook has never been known for its video feature, but significant growth over the past year has made it a key rival to YouTube. Dado Ruvic/Reuters

YouTube turns 10 next month, but after nearly a decade of being the unquestioned leader in online video, the Google-owned service finally has a formidable rival: Facebook. Though the social network has never been known for video, it has spent the past year adding user-friendly features and building its service into a challenger capable of putting a dent in YouTube’s monopoly -- and advertisers and brand marketers are starting to take note.

Facebook’s video potential became apparent last summer when users shared more than 17 million videos for the ALS ice bucket challenge. Since then, there have been more signs of progress. Facebook video hit a milestone in November, when for the first time, more videos were uploaded to the social network than the number of posts containing YouTube links, according to social media analytics firm Socialbakers.

Facebook's unique desktop video views for September were 491 million, up 38.5 percent year over year, according to comScore. YouTube’s audience was 831 million, but its growth for the year was a mere 4.8 percent. During the same period, YouTube's market share for online video fell from 58 percent to 56 percent while Facebook grew from 24 percent to 33 percent.

Facebook’s progress in video is no accident. Since 2013, it has been introducing new features and working with content creators -- including YouTube personalities and the NFL -- to make its video service a contender. Just this month, Facebook acquired QuickFire Networks, a startup whose technology makes it quicker and easier for users to upload and watch videos on Facebook.

“People are consuming video on Facebook like crazy, so that creates an opportunity for brand marketers. Marketers today are seeing a challenge getting their video content discovered. The news feed is the place people go to discover what matters to them,” David Fischer, Facebook vice president of global business and marketing partnerships, told the Wall Street Journal.

That growth has Facebook set up to generate more than $700 million from video ads in 2015, according to an estimate by RBC Capital. For advertisers, Facebook is an attractive place for video because of how much time hundreds of millions of users spend on the social network every day, Debra Aho Williamson, principal social media analyst for eMarketer Inc., said. Users can open up their Facebook news feed and come across a video ad that automatically starts playing. For comparison, YouTube's audience is not as big, and it has no social scroll, Williamson noted.

“Advertisers are looking to Facebook for that immediate bump in awareness because … it's so easy to just click that share button and send it off to your friends,” Williamson said. “Brands are seeing that Facebook is becoming a good vehicle for when you want to get a lot of attention for something, like you just launched a product or you have a brand-new commercial.”

Making videos play automatically has been essential for Facebook’s video growth, Brian Blau, an analyst at Gartner, said. Videos that start on their own “really prompt people to at least think about the first couple of seconds of a video and whether they want to watch more or not,” Blau said. “At a minimum, [advertisers] will get a couple of seconds of airplay time ... and that’s better than nothing.”

Facebook’s next task is figuring out how to monetize video without driving away users. The company doesn’t want to use pre-roll ads, which are the ads most video services show before a clip starts playing. Instead, the social network is experimenting with different formats, including ads that play after a video, or post-roll. “Post-roll isn't a typical format. You don't see too many advertisers raising their hand and going, 'Yeah, I really want to be after the content,'” Williamson said. “Think about movie theaters. Who puts an ad up after the movie ends? Nobody.”

Monetizing video may not be the priority at the moment, though. Instead, Facebook appears to be focused on growing its video service the same way it grew its user base a decade ago, before introducing ads. “They want to encourage their users to upload more video," Williamson said. "By tweaking the algorithm to show more video, it probably drives people to go, 'Hey! I want to upload more video.' It becomes a self-perpetuating thing."

If Facebook continues to grow video steadily and eventually figures out video advertising, it’s going to be a headache for YouTube. Facebook supplies nearly 70 percent of YouTube’s social-generated traffic and more than 5 percent of its total traffic, making it the Google-owned video service’s biggest source of viewers aside from search engines, according to analytics firm SimilarWeb. Nearly 20 percent of traffic leaving Facebook went to YouTube in the third quarter, but that could diminish as Facebook grows its own video service.

“Facebook is a very important source of traffic for YouTube," Ariel Rosenstein, senior director of corporate marketing at SimilarWeb, said. "With Facebook making moves to encourage users to upload videos directly to Facebook, it will be interesting to track if this has an effect on YouTube."