Source: Facebook

Turn up the volume on that Facebook (NASDAQ:FB) video, and you might start seeing similar videos pop up in your News Feed. Facebook updated its algorithm last month to factor in data outside of "likes" and "shares" such as turning on the sound, making the video full screen, and enabling HD. Facebook is tracking how you watch videos on its platform to make better content recommendations in your News Feed.

The new algorithm rollout comes on the tail of additional video analytics tools that Facebook is offering to Page owners. The new tools allow Page owners to see their best performing videos based on several different metrics.

These updates could enable Facebook to compete more effectively against YouTube. Both companies serve billions of views per day, but each take different approaches. The passive viewing experience on Facebook may be able to outperform the YouTube interface where viewers need to know what they are looking for. But for Facebook to succeed, the recommendations need to be great.

Showing you what you want before you know you want it
The ultimate goal of the News Feed is to show users the things that they will most likely be interested in seeing. More interesting content leads to higher engagement which leads to greater opportunities to show advertisements.

With videos, Facebook is doing a lot to learn not only which videos you like, but what exactly is in the video. Facebook can gather a few clues about a video from the Page that published it, but to really understand the content requires a bit more.

Earlier this year, Facebook purchased, which specializes in natural language processing. Using technology, Facebook is able to better understand what people in videos are talking about. Meanwhile, the company is developing its own AI in house to process images, so it can recognize the things in videos as well.

That information, coupled with the data Facebook is able to gather on user viewing habits, will enable Facebook to show users the most interesting videos on its platform, catered exactly to their taste. The new analytics tools for Page owners should help them produce more of the interesting videos that users engage with in some form, whether that is a share or simply enabling full-screen video.

YouTube still has big advantages
YouTube still has several advantages that prevent Facebook from putting a real dent in its business. The first is that its search engine is far superior. Searching on YouTube is a breeze, while trying to find a specific video on Facebook is practically impossible unless users remember where they saw it initially. Facebook is working on its search engine, however, and this is a problem it is certainly capable of overcoming.

The second problem may be harder to push aside. YouTube is currently host to nearly all of the best short-form video content on the Internet. Content creators gravitate to YouTube, because it has a revenue sharing program, and many creators have made a living off of ads sold against their videos with dedicated audiences and fans.

Facebook has reportedly offered signing bonuses to some of the top content producers on YouTube for exclusive rights on their content. More recently, it started offering select video creators a split of revenue on ads sold alongside their content in an upcoming feature set to come out this fall. That financial incentive may attract more high-quality content creators to come over to the Facebook platform.

In the meantime, Facebook will have to make the most of what it has. That means understanding user viewing habits and how videos are related to one another. The data it is gathering and organizing for creators should help it make videos in News Feeds more engaging.