Short-form videos on social media are both a problem and an opportunity for Netflix, co-CEO Ted Sarandos says

Netflix has a mixed relationship with social media creators on TikTok, YouTube, and Instagram. On one hand, they boost the streamer’s content when they make videos about it—reacting to plot twists in popular shows and rating new episodes, for example. But social media also directly competes with the streamer for the time and eyeballs of viewers—with some social media fanatics spending hours per day watching their favorite creators preen in front of the camera, tell stories, and attempt stunts. Netflix’s top executives are well aware of the frenemy dichotomy.

“When I look at the short-form viewing on YouTube and TikTok, some of it is adjacent and quite complementary to our viewing—our trailers, or creators expressing their fandom for our shows, like posting a Wednesday dance or ugly-crying watching One Day,” co-CEO Ted Sarandos said during the company’s Thursday call with investors and analysts, after reporting first-quarter earnings.

Videos about Netflix content that go viral “actually increase the fandom of our shows,” Sarandos said. Having loyal fans is important to Netflix as it helps the company to build products and experiences around its content, like its nascent video game initiative and the brick-and-mortar Netflix House stores that will sell food and merchandise themed to its trending shows and movies. Of course, it also helps to attract and hold onto subscribers.

At the same time, Sarandos acknowledged the obvious rivalry that risks hurting Netflix's business. “Some of that viewing is directly competitive with us,” he said. “The art of this has always been finding the right balance of both.”

Netflix isn’t the only streamer in competition with social media. Short-form videos—like those on TikTok, YouTube Shorts, and Instagram Reels—offer an alternative to traditional television programming. The videos can be highly addictive, researchers have found, because social media companies use algorithms to show users what most appeals to them, and the content feed is nearly infinite.

In a Friday note to investors, AllianceBernstein analyst Laurent Yoon cited social media as a risk to Netflix’s business. Netflix may dominate streaming now, but that doesn’t mean it will do so into eternity. “Short form videos are taking users eyeballs, which could have a long term impact on engagement,” he wrote.

Netflix wants to grasp consumer attention for as long as possible and is increasingly emphasizing engagement as a core metric for investors. Now that it has an advertising tier, the company can make more money from some subscribers based on how long a person watches content, and by extension, the commercials it shows them. And time subscribers spend scrolling through short-form videos is usually not spent watching Netflix as well.

Netflix’s first-quarter revenue and earnings ended up beating analyst expectations, despite the lure of social media to its users. The company generated $9.37 billion in revenue during the first three months of the year, up 15% from its year-ago number. The streamer also blew past the consensus estimate of $4.54 earnings per share, reporting $5.28, up 83% from the same time last year.

Still, Netflix’s stock tumbled 9% on Friday after the announcement, to $558, due to a lower-than-expected revenue forecast for the second quarter.

Netflix has its eye on content creators 

Hoping to better leverage social media, Netflix appears interested in developing shows and movies with people who have become social media stars, Sarandos hinted during the earnings call. Alliances would be a way for the company to cross over into social media without actually becoming social media.

“These platforms have always been a way to have new voices emerge, and we’ve got our eye on them as well, to try and develop them to the next generation of great storytellers on Netflix,” he said.

The streaming platform has already produced a handful of shows with influencers, including Haters Back Off, a two-season 2016 comedy series featuring YouTuber Colleen Ballinger’s fictional character Miranda Sings. Netflix is also behind the 2019 series Tidying Up with Marie Kondo, a reality show about the Japanese home organizer Marie Kondo who became famous for her books and television appearances.

Netflix may see the built-in audience that social media creators bring as a way to boost its subscriber count. Still, for now, at least, Netflix has a long way to go to get there.

Rachyl Jones

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The rest of today's Data Sheet was written by David Meyer.

This story was originally featured on Fortune.com