Facebook Video Advertising to Sweeten Media Giant’s Revenues

facebook video advertising

Facebook video advertising, to be released in late April or early May, will step up the company’s efforts to further monetize its business model. The social media giant has been watching the increasing number of companies posting branded video advertisements on their companies’ Facebook accounts without paying Facebook anything to carry those ads. Facebook wants a piece of that action. The long-rumored move is just one of several by various internet entities to improve revenue.

The company has been reassuring users that the Facebook video advertising program will be unobtrusive for users who are not interested the advertising. Facebook says the new ads will be tasteful and restrained 15 second spots that will remain small and silent, until the visitor clicks on them. Once clicked, they will take over the user’s screen and turn on the sound but, remember, only for 15 seconds…each. The tasteful restraint will be ensured by a company called Ace Metrix, which monitors advertisers campaigns for appropriateness while also targeting advertisements to preferred market segments identified by the advertisers and their agencies.

Facebook’s video advertisements will be sold like television advertising, by time, rather than space, and will give the advertisers the option of selecting specific time slots at adjusted rates, and to select demographic and geographic targets. This is major league advertising, and only well-heeled advertisers will be able to get into the game. The videos will be screened for “appropriateness” as well as production quality. Home movies are out. Facebook video advertising will appear in Facebook’s “third column” (third from the left), where the company’s advertising has always been run. The influx of video advertisements will probably steal space from smaller advertisers seeking to place static display advertisement on Facebook’s pages, while also driving up the asking prices for the remaining spaces.

The video advertisements will begin running silently when visitors access their timelines, and that has inescapable usability implications, especially for consumers using older, slower computers with less memory, and those running on slower internet connections.

Facebook has obviously weighed the trade-off between users turning away from Facebook in response to the negative impact of video advertising on computer performance and the increased revenues from the video advertising, and they like the increased revenue over keeping a small number of disgruntled customers.

Facebook’s press releases, posted on their Business Blog, intimated that the video advertisements would start showing up in Facebook users’ timelines in April or May, but PC Magazine claims they are already here, reporting that the first video ad, for Summit Entertainment’s new film, Divergent, has already appeared on a limited number of news feeds.

Video on Facebook is a growth industry. Overall, video consumption over the internet decreased by 3 percent in January of this year, but Facebook users increased their video consumption by 33 percent and the time that Facebook users spent watching videos on Facebook was up by 67 percent.

Facebook users obviously like video. The question is whether they are going to like Facebook video advertising. There is nothing new about video advertising on Facebook, because advertisers have been posting items on Facebook with embedded video advertising. The question is whether Facebook members are going to tolerate having more space on their computer screens taken up by paid advertisements, in addition to the ones they have to wade through in the Facebook feed.

The push to further enhance Facebook’s operating revenue is being reflected in the company’s stock price, which has risen from a 52 week low of $22.67 to $68.29 in today’s trading on moderate volume.  The question for many consumers, when it comes to monetization is, “When is enough, enough?”  Apparently, not ever, as internet operators struggle to find new ways to monetize their websites.

There are three models that website operators use to generate revenues. They sell subscriptions to their content, they sell good and services through their websites, or they sell advertising on their websites. All website revenues come from some combination of those three sources.

No one cares about the intrusion of advertising on websites that sell goods and services, because the people who visit these sites are accustomed to advertising in the marketplace, whether online or off-line. People who subscribe to websites that require subscriptions do so with their eyes open. They know they are buying access to a product. Everyone else is part of the captive audience, eyeballs for rent to the highest bidders. What website operators sell, ultimately, is the attention of their visitors. In effect, they sell the time people spend on their websites to advertisers, which equates to the days of their lives.

The Facebook video advertising experiment may bring the social media giant into direct competition with web browsers like Google, which are seeking ways to increase revenues from their properties. That competition cuts both ways, as the two internet giants compete for advertisers’ dollars and for the attention of the people who use their web sites.

By Alan M. Milner

PC Magazine
NBC News

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