Facebook pushes ahead with video ambitions
Facebook's latest strategy is to grow both user-generated and advertiser-created videos as it tries to get a firm foothold in this nascent but growing market.
The strategy appears to be working. While Madison Avenue is not known for risky experimenting, advertisers are already testing the waters with live video. General Motors, for example, launched its electric Chevy Bolt EV through Facebook Live this year.
It helps that Facebook had successfully transitioned from desktop to mobile, despite early doubts. Now, when Facebook tries to sell video to its advertisers, it can simply point to past financial results. The percentage of ad revenue that came from mobile has increased every quarter since the company began reporting this figure in 2012.
On Wednesday, the company reported third-quarter earnings of $2.37 billion. The social media company posted revenue of $7.01 billion in the period ending September.
In the April-June quarter, Facebook had $6.24 billion in advertising revenue, a 63 per cent increase from a year earlier. Mobile advertising accounted for 84 per cent of this. Facebook had 1.71 billion monthly users as of June 30, up 15 per cent from a year earlier.
Video is the next challenge. Where Twitter failed with the quirky, killed-off video app Vine, Facebook is succeeding with Instagram, not to mention its main service. Users are posting and watching live and recorded videos, thanks to more powerful smartphones and a relentless prodding by Facebook to do so.
If you use Facebook, for example, you likely received notifications that your friend "is live now" or "was live" that is, broadcasting live video from wherever they happen to be, doing whatever they happen to be doing.
While Facebook does not break out how much money it makes from video advertisements, the company needs them to keep growing revenue at the impressive rates it has since going public in 2012. Video ads make up a small but growing slice of the overall digital ad market. Research firm eMarketer expects US mobile video ad spending to hit $7.1 billion in 2018, up from $4.5 billion this year. That's about 10 per cent of the overall money spent on mobile advertisements.
Live and prerecorded videos are just one example of the new ways Facebook is finding to show you ads. Down the road, expect ads on the messaging service WhatsApp, or on Oculus Rift, its virtual reality headset. If you are one of the one billion people who use Facebook
Messenger, you are likely seeing the precursor of ads in the service, in the form of businesses messaging you with automated "chatbots."
Facebook is the world's No. 2 digital ad publisher behind Google. Another tidbit: eMarketer estimates that each Facebook user, on average, will generate an estimated $15.83 for the company this year.
There have been some hurdles. In September, Facebook disclosed that it overstated the average length of time users watched video ads on its site. The measurement did not affect how much Facebook charges to run video spots, but analysts say ad agencies may have used the Facebook estimates as a key metric when they plan campaigns and decide how much advertising to place on Facebook or competing sites.