A year ago, Facebook was not a destination for video content. Now, the social media company sees four billion video streams each day, as it noted in its first quarter earnings call today. Almost overnight, Facebook became a video juggernaut. And three quarters of those views occur on mobile.
Video on Facebook has the company’s shareholders excited. The category is seen by many as the holy grail of online advertising. Sight, sound, and motion is a more compelling sales opportunity than a flat banner ad, and advertisers are willing to pay more for it. But Facebook has said little about its efforts to monetize video ads. Pitch decks have leaked. Speculation has abounded. Facebook even held a secret video sales event today, meant to capture advertiser budgets ahead of the “NewFronts,” the digital version of the broadcast industry’s programming “Upfronts.”
In the question-and-answer portion of Facebook’s earnings call, investors repeatedly asked about its plans to make money from video ads. Will Facebook attract big TV advertisers to its platform? How much money will Facebook invest in that platform? What’s the breakdown of video ads versus regular ads? How many of those four billion video views are ads? Will Facebook engage in long-form video? Will it compensate professional video creators?
But CEO Mark Zuckerberg, COO Sheryl Sandberg, and CFO Dave Wehner dodged most of those questions. Listeners learned precious few details.
Sandberg tamped down expectations of video becoming a major source of new revenue. Video ads may not contribute much incremental growth, she noted, because they sometimes take the place of a regular Facebook ad. In other words, a brand a looking to buy video ads may simply purchase a sponsored video in place of purchasing a sponsored post. Both sponsored videos and sponsored posts appear in Facebook’s stream of content. These ads are purchased programmatically through an auction, so there is no price difference between a sponsored video post and a regular sponsored post.
Left to speculate, Josh Olson, a technology analyst with Edward Jones, said he estimates video ads will contribute 5% in incremental revenue in 2015. Facebook does not appear to be in a rush to monetize its explosive growth in video. “They’re taking their time getting there,” he says.
Update: This morning Facebook announced one new detail: Anthology, a program that pairs brands with media partners who will create video ad materials for them to promote on Facebook. Partners include Vice Media, Vox Media, Tastemade, Oh My Disney, The Onion, College Humor, and Funny or Die.
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