Given its scale, engagement and significant amounts of user data, it was only a matter of time before Facebook introduced a video advertising product to marketers.
On Friday the company announced it was pressing the button on what it calls ‘Premium Video Ads’, after 3 months of selected testing across the globe. What this means is YouTube now has a legitimate competitor of similar scale and resource in the battle to control online video advertising.
Back in 2011 I predicted that Facebook would become a ‘fourth Free to Air TV’ player given its significant size and engagement. The reasons I gave were:
- It’s simple to buy
- Minimal (ad) formats
- The platform de-complicates a convoluted ecosystem
- Creative agencies have bought into it and have discovered ways to make money from it
- It’s a lower touch option for media agencies than a 50 line media buy
- Brands have bought into it (most importantly) as usage is ubiquitous
- It’s a digital champion that the new generation of digital strategists actively lobby for (unlike most sites established pre-2004, which are often now considered ‘old’)
- It now has numbers that are starting to rival TV (i.e. big chunks of concurrent users during key times – evenings, daytime)
In the three years that have passed since then the only thing that has changed is that Facebook has become even larger and more powerful. In Australia it has a staggering 10 million users, who on average spend over eight and a half hours per month on the platform. Compare this eight hour plus engagement with local brands such as Sensis (eight minutes per month) or Yahoo!7 (one hour and twenty one minutes per month) and it’s clear just how dominant Facebook is in terms of mindspace among Australian internet users.
The launch of premium video ads opens up this ten million strong user base to TV commercials, an area Facebook has been unable to play in. YouTube, owned by Google, has held the dominant position in this area and, aside from a few bit players, remains largely unchallenged in terms of the lion’s share of video advertising dollars -- until now.
Facebook has thought smartly about the ad product so as to not alienate users. Ads are a maximum 15 seconds, and in their own words “each 15-second video ad will start playing without sound as it appears on screen and stop if people scroll past. If people tap the video, it will expand into a full-screen view and sound will start.”
In Australia, online video advertising is an industry generating around 150 million dollars in annual revenue. However, it is growing fast -- really fast. In 2013 it grew by 72 per cent compared to 2012 and many experts suggest that it could grow at an even faster clip if there was additional supply added to the inventory pool. The largest video-based advertising area, TV, is dominated effectively by three Free-to-Air channels and the MCN pay TV sales house. This is a simple ecosystem for advertisers who really only need to consider four players when allocating TVC spend. Facebook and YouTube/Google can easily join that club and make video across broadcast and digital fundamentally a six player game. As inventory trading moves more toward programmatic and automated platforms, a common currency will evolve across platforms, which will make placements easier and more efficient.
To combat any advertiser uneasiness around results, Facebook has partnered with Nielsen to measure campaign performance, with advertisers only paying on what the Nielsen Online Campaign Ratings product measures. Facebook has also partnered with a company called Ace Metrix to “objectively measure the creative quality of the video in the Facebook environment, and highlight performance indicators for advertisers such as ‘watchability’, meaningfulness and emotional resonance.”
In short, Facebook is closely watching how its users are engaging (or not engaging) with video ads, and if an ad is scoring low in this area it will either be de-prioritised, or forced to find other means to boost its relevance.
Advertisers will no doubt be eager to try the new product. Facebook offers advantages over traditional broadcast TV due to its user data -- covering not just age, gender and location, but friendship network, stated interests, actual interests and content preferences. This means if you want to reach a 23 year old guy, university educated, who works in software and likes men’s fashion you most probably will be able to with very minimal wastage.
For Facebook this advertiser demand will no doubt continue to fuel its impressive growth rate. Its stock is up 146 per cent over the past twelve months fuelled by continued earnings growth and ad product enhancements that continue to improve yield yet show no sign of slowing user growth rates.
For the online ad industry it’s yet another sign that Facebook and Google continue to be leading the way not only when it comes to innovation, but revenue and share.