How Facebook Is Working On Attracting More Video Advertisers ?

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According to eMarketer, the U.S. digital video ad spending is expected to reach nearly $15 billion by 2019, comprising more than 16% of the total digital ad spending. [1] And Facebook (NASDAQ:FB)  is working on several initiatives to attract video advertisers on its platform. The company believes that video is an important part of Facebook’s experience.  And while 100 million hours of videos are watched daily on its platform, [2] the social media giant is now testing new experiences to enable people discover videos they might be interested in.  We believe that as video consumption on Facebook continues to increase, with its expanding user base and ability to target a certain demographic profile, it is an attractive destination for video advertisers and the company can attract TV ad budgets, thus grabbing a higher market share in the video ads space.

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Dedicated Space To Watch Videos Can Create Exclusive Space For Video Ads

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In its Q4 2015 earnings call, Facebook mentioned that it currently has 500 million people watching a video a day. [3] The company has been testing new experiences such as suggested videos, which enable people to discover more videos that might interested them. It is also exploring ways to give users a dedicated place on Facebook to just watch videos.  As consumption of videos on the platform increases, Facebook is working on matching the ad formats with the content consumed by the users, thus working on ways to attract more video advertisers. If it creates a dedicated space to watch videos within its platform similar to You Tube, it could potentially use that space exclusively for video advertisers, reducing the ad load on its “News Feed” and attracting more video advertisers.

Different Video Ad Formats Can Give Marketers More Choice

As video ad spending increases, Facebook is working on initiatives to provide various formats of video ads to marketers according to user behaviour.  Some users watch the whole 30-second video ad with sound, while others watch shorter formats, without sound.  Facebook is convincing marketers to work with different video ad formats to increase user engagement and generate higher value for the ad. It provides the option to have a short ad with sound off or a longer ad with sound on and any option in between.  The company is working on making marketers adapt their video advertising to its platform, which is different from TV advertising.  Its ability to convince marketers to use different formats of video ads on its platform will be key for its success in this space. Facebook did one such experiment with the Microsoft Xbox for its campaign to launch Halo 5, where the marketing agency used a video ad optimized for Facebook and Instagram, understanding that  viewers watch videos differently on their mobile news feed than on TV. Videos under this campaign were created to capture audience attention in the first 3 seconds, without sound, which drove over 380 million impressions and 49 million video views in key markets, indicating the success of this campaign. [3]

We believe Facebook is well poised to capture a larger share in the growing video advertising space and with its innovations to increase video consumption on its platform and provide interesting opportunities to marketers to tap into its users via engaging video ads; it should be able to generate higher revenues from this stream of advertising.

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Notes:
  1. U.S. digital display ad spending to surpass search ad spending in 2016, eMarketer, January 11, 2016 []
  2. Facebook  Q4 2015 Earnings Transcript []
  3. Facebook Q4 2015 Earnings Transcript [] []