The video ad market is on the cusp of a multi-billion dollar expansion that could transform Facebook and Instagram into syndication platforms putting pressure on the existing TV model, but those users may not accept commercials as readily as major online video sites.
TV advertising is a big business, but online video ads are projected to grow even more rapidly. eMarketer says that advertisers in the U.S. will spend $66.4 billion on TV ads this year, compared to $4.1 billion online. However, it foresees 40 percent growth in video ads.
Facebook Has the Potential To Generate $1 Billion in Ad Revenue
Morgan Stanley financial analysts are predicting that Facebook could generate over $1 billion next year in video ad revenues and as much as $6.5 billion by 2020. Advertisers are willing to pay a premium to Facebook because its ability to reach the coveted 25-34 demographic can exceed TV networks’ reach, Nielsen has found.
Facebook is especially attractive to advertisers during primetime hours. Nielsen has found that it is “a strong driver of duplicated reach—meaning that a marketer could reach the same consumers online and on TV.” Facebook complements TV ads and is overturning the perception that the Internet is only for niche audiences by becoming a channel for “broadly messaged, brand advertising,” Nielsen said in a July report. What’s important to note is that Facebook has served as extension to the main TV experience by bringing value through second screen activities. The Nielsen report noted that:
The emergence of far-reaching publishers like Facebook, however, means that marketers now have another option for reaching consumers en masse. Likewise, the availability of true cross-screen metrics enables them to understand how digital can reinforce and complement their TV investment.
Facebook User Attention Span Is An Issue
Facebook has the scale to do this with its 1.15 billion monthly active users, but actual consumer interactions with its video ads could deviate from what analysts are expecting. Consumers are willing to sit through 30 or 60-second advertisements on online video platforms like YouTube, Hulu and UVidi, because they want access to the content. The social consumer is different - they don’t have the same attention span.
Moreover, Facebook doesn’t have a content strategy to hold users’ attention. The majority of the content that it distributes is user-generated and short-form, thus greatly reducing the likelihood that anyone is going to want to sit through a commercial to watch their friend’s cat fall off a couch. As video consumption evolves, we are seeing that 15 and 30 second pre-rolls are effective when users want premium content. It’s likely you will see much shorter messaging on social platforms with pre-roll that is 5 to 8 seconds long. Early testers will try to create branded content and use Facebook as a distribution source, but currently it can’t compete with the big video platforms because it won’t deliver equivalent results with its existing videos.
That’s the challenge: Facebook offers a very different customer experience from other content distribution sites. A model that could work would be to complement a TV advertising package with a Facebook extension that includes video to target mobile devices. More than 40 percent of Facebook’s advertising revenue and 68 percent of its traffic come from mobile customers, according to its Q2 earnings call in late July. That’s assuming users want ads.
Consumer sentiment could be why Facebook is moving so cautiously with video ads. It wants its ads to display in ways that aren’t distracting or alienating towards users the Wall Street Journal reports. “Striking that balance between consumer happiness and commercial opportunity has been a challenge for the young company, leading to delays and frustrations among the marketers it is trying to woo,” the report said.
While Facebook tinkers, established video platforms are better positioned to drawn display budget because of the duration of the videos. Morgan Stanley predicts that YouTube will generate $5.7 billion in video ad revenue next year, which is estimated to grow to approximately $17 billion by 2019.
Facebook could meet the street’s expectations, but that’s only true if consumers buy in. Content is king and will influence consumer interactions with video advertisements.
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