Will Video Ads Sink Facebook? Social Media Giant Faces User Backlash

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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Viewership of Ad-Supported Online Video Has Grown 17% This Year

Ad-supported online video viewership has grown 17 percent year-over-year, according to a new survey by marketing research firm FreeWheel.

According to the study, online videos that are 20 minutes or longer carry an average of seven ads. FreeWheel says that viewers of those long-form videos watch whole ads at a 93 percent clip.

FreeWheel also discovered that online video ad views have grown 49 percent this year. The research attributes the uptick in ad views to consumers’ growing acceptance of online video advertisements.

The study examined the growing trend of online video views on non-computer devices as well. FreeWheel found that 1.3 billion consumers view video on their smartphone, game console, or other portable device. Non-computer-based viewership made up 10 percent of all online video views for the year.

Over 60 percent of non-computer-based videos viewed came from Apple devices. Users of the iOS operating system saw more online video when compared to Android users. Consumers running an Android device only claimed 31.5 percent of non-computer online video ad views.

The lion’s share of mobile online video views goes to iOS users, despite the fact that Apple’s mobile device market share shrunk this year. According to a recent study from analysis firm IDC, Apple came in a distant second in the mobile device market for Q3 2012.

FreeWheel studied over 14 billion video views and 10.7 billion video ad views to come up with its numbers. Statistics were compiled from top cable networks, web video distributors, and ad-supported entertainment companies.

The study comes following another online video study from earlier this year. Last August, comScore reported that 184 million U.S. Internet users watched 36.9 billion online videos in July 2012. ComScore says that online video viewership for the month of July has grown every year since 2007.

UK web advertising spend to hit £5bn

Facebook ad revenue expected to increase by 84% as mobile and online video income also soars

UK internet advertising spend is likely to reach £5bn in 2012, with Facebook on track for an estimated 84% revenue surge to £175m.

Figures from the Internet Advertising Bureau (IAB) and PricewaterhouseCoopers reveal brands spent £4.8bn in 2011, up by £687m. The 14.4% leap marks the highest growth rate in five years.

FMCG became the second-biggest-spending sector on display ads, at just 0.2% less than financial services, which has a 15% share of the total.

Retail brands are now the third-biggest-spenders on display with a 12% share, having accounted for 10% of total display in the second half of 2010.

The UK needs to see growth of just over 4% in 2012 – pretty much a certainty given historical levels – for the market to be worth £5bn annually.

Strong growth in 2011 was partly due to an explosion in advertising on mobile devices and tablets, which rose 157% to £203m last year.

Online video advertising doubled year on year to £109m as online TV services such such as the ITV Player and Channel 4’s 4oD increased in popularity.

These two sectors have helped fuel the overall display advertising market – banners and interactive ads seen on most websites – to more than £1bn for the first time.

Display advertising grew by 13.4% to £1.13bn in 2011.

The IAB said that the display ad market has been pumped up by fast-moving consumer goods companies such as Unilever and Procter & Gamble finally latching onto the sector.

The big FMCG companies are the biggest UK advertisers on traditional media, such as TV, press and radio, but have been slow to recognise the benefits of display ads.

One of the biggest beneficiaries of the surge in display advertising is Facebook, which figures from Enders Analysis estimates doubled revenues in 2011 to just under £100m.

This unofficial estimate – Facebook does not disclose its financial performance – is expected to surge by a further 84% this year to £175m.

The stalwart of UK internet ad spend is search advertising. which is dominated by Google.

Search, which accounts for 58% of total UK digital ad spend, grew 17.5% in 2011 to £2.77bn.

The growth has come from the British public’s love of web search and the cost-effective nature of search advertising.