Saturday, August 31, 2013

Video Ads Predicted to Bring $1 Billion in Ad Revenue to Facebook

Facebook video ads
What’s the future of advertising on Facebook? Video ads. As Patrick mentioned in a recent blog for us here at CEM, a report by Morgan Stanley predicted that video ads will generate over $1 billion of revenue for Facebook in 2014. When you consider the fact that video ads do not even exist on Facebook yet, this number is quite impressive. On the downside, these ads are also predicted to cost advertisers more than the amount it cost to advertise during the 2013 Super Bowl, the advertising highlight of the year.

The Numbers

You may be wondering how Morgan Stanley could possibly make such a huge prediction, considering that video ads aren’t even available yet. The report conducted was based upon data from various sources, including The Financial Times and Bloomberg. In addition to the prediction of $1 billion in revenue for 2014, the report also estimates $6.5 billion by 2020. The ads will likely appear later in the year and will only be available in the U.S., with Europe to follow in late 2014.

The Video Ads

Many are skeptical about the success of video ads on Facebook, as they may become more of an annoyance to users. Facebook has stated that video ads will be 15 seconds long, and that they will start automatically but have no sound until the users taps on the ad. It will then start over with sound. Users will only find one advertiser in their News Feed per day, with up to 3 different ads appearing. Studies conducted about the Bud Light ads that appeared on Facebook found favorable results, indicating that users will probably react positively to video ads.

The Super Bowl Prices

What remains most unbelievable about the introduction of video ads is the reported prices for advertisers. Facebook will be charging anywhere from $1 million to $2.5 million each day for an advertiser to run the 15 second ads. These are Super Bowl level prices, with a 30 second ad during the 2013 Super Bowl costing $4 million each. Facebook is justifying the incredible prices based upon how large their audience is, particularly during primetime hours.
While Facebook has been improving its Pages feature to the benefit of small, local businesses, the advent of video ads is likely to leave those clients behind. Small businesses will not be able to afford these outrageous prices, effectively fencing in video ads to only major corporations. Time will tell if less expensive options will be available, perhaps during different time slots or to smaller, local audiences on the network.