Last year, Facebook (META 3.87%) launched Facebook Gaming, a game streaming platform aimed at challenging Amazon's (AMZN 3.55%) Twitch. Streamlabs reports that between the first quarter of 2018 and the second quarter of 2019, Facebook Gaming's number of active streamers surged 236% to an all-time high of 153,000.

Twitch had 2.94 million active streamers in September, but that marked a drop from its 3.67 million streamers a year earlier and indicates that it's losing ground to rivals like Alphabet's (GOOG 1.03%) (GOOGL 1.08%) YouTube, Microsoft's (MSFT 2.35%) Mixer, and Facebook Gaming.

Facebook remains in fourth place behind those three leaders, but it has a few tricks up its sleeve. Let's examine three ways it plans to catch up.

A female gamer plays a PC game.

Image source: Getty Images.

1. Offering a more profitable platform

Facebook offers two ways for gamers to generate revenue. First, gamers can be selected for Facebook's "Level Up" program, which requires streamers to have over a hundred followers and stream content for at least four hours over two days within a 14-day period. Those streamers gain access to stars (tips from viewers worth $0.01 apiece) and the ability to launch subscriptions for their channels. Twitch, YouTube, and Mixer offer similar tipping and subscription platforms.

Second, Facebook selects top-tier creators to become partners. They sign a contract, agree to streaming quotas, and gain regular financial support from Facebook. They're also allowed to test out newer features like ads and custom sticker packs. Twitch offers a similar dual-tier platform for streamers, with affiliates at the lower level and partners at the higher level.

Several gamers recently told Business Insider that they were making more money on Facebook Gaming than other platforms, since it was easier to build a bigger audience with fewer competing streams and direct access to Facebook's sprawling social network. Those claims were anecdotal, but they indicate that Facebook Gaming could lure aspiring streamers away from rival platforms with bigger paychecks.

2. A broader gaming ecosystem

Earlier this year, Facebook merged its live streams, gaming groups, videos, and Instant Games (mini-games for Facebook and Messenger) onto a dedicated tab in its social network.

A woman in glasses plays a game on a PC.

Image source: Getty Images.

Facebook claims that over 100 million active users participate in over 340,000 gaming groups and that over 20 billion Instant Game sessions had been played by the end of 2018. That broad reach, along with gaming videos and live streams, widens Facebook Gaming's moat against Twitch, YouTube, and Mixer.

Those three platforms don't offer mini-games, and their members generally interact in live chat rooms instead of the news feeds in Facebook's groups. Facebook is also currently running a beta test for a dedicated Facebook Gaming app, which could bundle together all those features on a single platform.

3. Focusing on emerging markets

Facebook Gaming faces an uphill battle against Twitch in developed markets like the U.S., but it's especially popular in Brazil, Mexico, and the Philippines, which are also three of its mobile app's beta-test markets. That push complements the growth of Facebook's core business, which is relying more on the growth of emerging markets to offset its slowdown in the U.S. and Canada.

Last quarter, Facebook's monthly active users (MAUs) rose just 1% to 244 million in the U.S. and Canada, but grew 2% to 385 million in Europe, 12% to 1 billion in Asia, and 8% to 782 million across the rest of the world. Streamlabs notes that Facebook Gaming's streamers in Asia, Latin America, and Europe account for the lion's share of the platform's growth. NexxuzHD, one of YouTube's top Spanish-speaking streamers, also recently started streaming games on Facebook Gaming.

Therefore, Amazon, Microsoft, and Google should keep a close eye on Facebook Gaming's pursuit of gamers and streamers across these overseas markets.

The key takeaway

Facebook Gaming isn't a major source of revenue for the tech giant, which generated 98% of its sales from ads last quarter. Instead, it's likely incurring losses as it invests in more content creators to attract viewers.

However, Facebook clearly considers Facebook Gaming to be another essential part of its video ecosystem, which also includes Live, Watch, and IGTV. Expanding these platforms could help Facebook lock in more viewers, generate more ad revenue per user as its user growth plateaus, and raise its barriers against YouTube and Twitch's expanding video platforms.

Facebook Gaming remains an underdog, but its growing appeal among game streamers, its popularity in emerging markets, and the support of the company's core social network indicate that it could still disrupt the global game streaming market.