It’s no secret that Facebook (FB) has been driving hard to increase the amount of advertising cash it brings in from its 1 billion-plus users around the world.
After all, FB stock holders can’t really depend on rapid user growth any more seeing as about 1 in 6 people on the planet already use Facebook. Thus, the company has been focused on targeting for its ads, which creates higher success rates — most prominently, via its 2013 acquisition and 2014 rollout of Atlas marketing tools for advertisers.
However, the recent trend to move beyond conventional display advertising and into video is worth watching.
In spring, FB made big waves as it forged partnerships with publishers to host their content on Facebook’s own site — a huge move away from the previous world of clicks and referrals, and a potentially disruptive one to many websites. It’s natural to think that if this movement gains any momentum, FB will endeavor to forge similar partnerships with video providers, too.
A few weeks ago, TV and Internet video research firm Ampere Analysis predicted a big fight between Google (GOOG, GOOGL) property YouTube and FB as both look to serve more videos (and video ads) to their large audiences.
And now, reports indicate Facebook is experimenting with so-called “floating videos” that allow a supposedly seamless integration of video into the News Feed without interfering with scrolling or otherwise mar the user experience.
Skeptics will state that all this adds up to a money grab, but it’s important to note that Facebook has a big personal interest in not alienating users by serving up inferior content or plastering its site with ads.
As TechCrunch put it, “Facebook is trying to plug the holes where users leak out.” So in theory, serving video on its site in an effective way — presuming it’s video that users actually want to see — is a more “sticky” experience and valuable to users who can stay in one place … and, of course, to FB stock as the company looks to serve up video ads.
It’s fair to be skeptical, but remember that GOOG similarly turned many heads in 2006 with its $1.65 billion acquisition of video site YouTube. Back then, the young site was an unprofitable playground for piracy and blurry do-it-yourself clips, so the move left many investors scratching their heads.
Since then, the rise of streaming video’s popularity and the potential for lucrative video advertising has come a long way as connectivity has improved and more folks than ever are “cutting the cord.” Time has vindicated GOOG stock on this decision, and as of last year, YouTube racked up $4 billion in total revenue — up from $3 billion in 2013.
Facebook clearly wants to be part of this movement, and it will be interesting to see how Google and Facebook go head to head in the future on Internet video.
The first tech giant to connect the dots here will be a big-time winner in the ad wars.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not hold a position in any of the aforementioned securities.
