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Home Latest News -TheHollywoodTimes From scale to engagement: Facebook becomes a video-first company

From scale to engagement: Facebook becomes a video-first company

Lexus, for example, recently ran a campaign with an astounding 1,000 unique video ads
Lexus, for example, recently ran a campaign with an astounding 1,000 unique video ads

By Eleni Marouli, Principal Analyst, IHS Technology

Facebook’s Q2 2016 earnings call centred on video and, for the first time, Facebook execs declared their aspiration to become a video-first company. If the journey to video ubiquity will follow that of their mobile-first strategy, Facebook is in good stead to become a hegemon in the video advertising space.

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The mobile-first strategy announced in Q2 2012 overhauled the original Facebook offering and made mobile the cornerstone of the social media company’s consumer and business offering. From 543 million mobile monthly active users and $0 in mobile ad revenue, Facebook grew to 1.5 billion mobile monthly active users and $5.2 billion in mobile ad revenue in just four years. The mobile-first strategy gave them scale in online audience and grew their revenue mostly by onboarding new advertisers (in the form of small businesses). Facebook also benefitted from rising app-install ads coming from the exploding mobile app economy. However, in a mobile-first world, attracting the big TV ad budgets from the large brands remains a challenge for Facebook.

Having achieved scale through mobile, Facebook is now shifting their focus to increase user engagement – and this is where video becomes critical. The Facebook executive team hopes that video will make the Facebook platforms “stickier” in what is becoming an increasingly competitive landscape for social media; YouTube, Snapchat and Twitter are all battling for online audiences. Facebook has now enabled video on the Facebook platform, Instagram and Facebook Audience Network and it is encouraging advertisers and publisher partners to adopt video ad formats quickly.

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Different skill sets needed for Facebook’s new strategy

A video-first strategy requires different skill sets to those of the mobile-first approach adopted by Facebook in 2012. This will be the first time Facebook will need to focus on content creation in addition to content distribution. Facebook is already paying media companies like the New York Times, Buzzfeed and CNN to produce video native to Facebook Live, Facebook’s live video platform, which is an unprecedented move for the social media giant. Media partnerships and content acquisition will be key to obtaining and retaining Facebook audiences going forward, which are increasingly migrating to platforms like Snapchat. Snapchat has already established partnerships with dozens of media companies and is monetising video content through advertising with CPMs as high as $40-50. Only when Facebook can demonstrate a growing engagement of their audiences in a video advertising-friendly environment (which is favoured by big brands), can it hope to unlock and start cannibalizing the TV ad budgets of brand advertisers.

Background:

Facebook reported another strong quarter, with $6.4bn in revenue (up 59.2% year-on-year) and $6.2bn in advertising revenue (up 63.0% year-on-year). Mobile accounted for 84% of advertising revenue at $5.2bn and grew 80.5% from Q2 2015. The strongest growth came from North America at 68.5% and accounted for 49.3% of all advertising revenue at $3.1bn. Asia also noted a large increase of 66.8% to cross $1.0bn, for the first time.

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Facebook monthly active users (MAUs) were up 14.9% to 1.7bn, of which 65.6% (or 1.1bn) logged in daily. In Q2 2016, Facebook noted 1.5bn mobile MAUs and 1.0bn mobile daily active users (DAUs).

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Valerie Milano is the well-connected Senior Editor and TV Critic at TheHollywoodTimes.today, a website that aggregates showbiz news curated for, and written by, insiders of the entertainment industry. (@HwoodTimes @TheHollywood.Times) Milano, whose extraordinary talents for networking in the famously tight-clad enclave of Hollywood have placed her at the center of the industry’s top red carpets and events since 1984, heads daily operations of a uniquely accessible, yet carefully targeted publication. For years, Milano sat on the board as a chief organizer of the Television Critics Association’s press tours, held twice a year in Beverly Hills and Pasadena. She has written for Communications Daily, Discover Hollywood, Hollywood Today, Television International, and Video Age International, and contributed to countless other magazines and digests. Valerie works closely with the Human Rights Campaign as a distinguished Fed Club Council Member. She also works with GLSEN, GLAAD, Outfest, NCLR, LAMBDA Legal, and the Desert Aids Project, in addition to donating both time and finances to high-profile nonprofits. She has been an active member of the Los Angeles Press Club for a couple of years and looks forward to the possibility of contributing to the future success of its endeavors. Milano’s passion for meeting people extends from Los Feliz to her favorite getaway, Palm Springs. There, she is a member of the Palm Springs Museum of Art and a prominent Old Las Palmas-area patron.