An influential Wall Street analyst blasted coverage of two developments during the week suggesting that Facebook’s new video advertising offering rivals the reach and market value of network TV.
In a report sent to investors late Thursday, Pivotal Research Group analyst Brian Wieser said.
“It overstates the opportunity on hand for Facebook.”
Wieser wrote in response to coverage of the study, including stories published by MediaPost.
“Headlines this week trumpeted a new study produced by Nielsen and commissioned by Facebook, which indicates they are ‘capable of delivering site reach levels comparable to major TV networks.”
While the report -- a custom Nielsen study paid for by Facebook -- found the social network reaches more people during the day than certain TV networks, Wieser described it as a “selective way of looking at the industry,” and implied it had little practical application in terms of the way that advertisers and agencies buy media.
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Wieser asserted, suggesting:
“Highlighting Facebook's dominant reach vs. individual networks during daytime wrongly implies that time-of-day is a first cut against which budgets are set. Perhaps they should be, but workflows associated with media buying (not to mention the distinct ways in which different media may influence consumers) dictate that the first cut of planning for large marketers is by medium. Digital media is separate from TV in this regard for many reasons: workflows are different, and lean-forward vs. lean-back environments mean they are generally viewed as different environments (not better or worse, just different); the means of assessment (how a budget is justified and how impressions are measured at the present time) are generally different, too.”
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Wieser concluded that the basis of comparisons in the report were “mostly irrelevant,” although it did elicit a significant amount of coverage in trade and consumer press and among bloggers, and social media outlets, including Facebook. Most of the reports also failed to note that Nielsen and Facebook are in cahoots, and that Facebook has licensed a panel of online users to Nielsen that is a major component of its online audience measurement services, and a key component of the cross-media measurement services it is developing that will be used by advertisers and agencies to compare TV and online advertising buys.
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But it was the simultaneous news cycle surrounding reports by various publications citing anonymous sources that Facebook is pricing its new video ad units at network TV-like rates -- $1 million to $2.5 million per day -- that seemed to spark real skepticism from Wieser, who implied the circulation of both pieces of news might have been part of a strategic plan designed to influence ad industry perceptions about Facebook’s video advertising reach, impact and marketplace value.
Weiser wrote.
“The news-flow has served to conflate a number of factors. While our model has long-assumed that Facebook will generate incremental revenue from online video, it will most likely be more modest than optimists might expect, and what they generate will not likely come from television budgets. Instead, we expect re-allocations of existing Facebook budgets or shifts of spending that would otherwise have gone to other media owners with online video inventory.”
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Ironically, Wieser concluded.
“If Facebook’s... er, Nielsen’s implications were correct, advertisers would be more likely to shift their spending from TV to other publishers with online video inventory than Facebook.”
This is especially true of Google’s YouTube unit, which Wieser noted does not currently support Nielsen’s online measurement service.
He concluded.
“Or video ad networks, or homepage takeovers involving video on virtually any portal. There are many ways to reach large audiences instantly on the Web with video.”
Despite the heavy spin factor surrounding this week’s news, Wieser noted that the pricing of Facebook’s new video ad units is, “in a word, significant,” because much the way Apple did with the initial pricing of the debut of its mobile iAds, it creates a sense of TV-like scale and premium market value that most digital inventory has so far failed to conjure.
Wieser pointed out.
“Most digital budgets, when discretely negotiated, amount to tens of thousands, and occasionally hundreds of thousands of dollars. While a single large advertiser's annual commitment to Facebook may amount into the millions for annual campaign spending, the absolute commitment which Facebook is asking for is well-beyond the scope of what advertisers will pay in a single one-off buy.”
Ultimately, Wieser suggests the units will be sold to boost the value of broader “packages” of inventory bought by advertisers and agencies, much the way TV networks allocate their most prized ad units as part of broader buys.
He explained, adding.
“This is not a negative, per se. New product iteration is generally a positive thing, as it helps sales justify higher pricing for media. But even then, if it were capturing share it would come from budgets intended for Google's YouTube or online video networks rather than television.”
COMMENTARY: When Facebook-owned Instagram revealed its Video platform in June, a subject I wrote about in a blog post dated June 22, 2013, some sharp observers instantly noted how convenient it was that the clip length was set at 15 seconds – an established ad-length in the TV world.
On August 7, 2013, Facebook made a major move to attract Madison Avenue advertisers by announcing that Instagram was introducing the option to upload videos rather than force users to create them from scratch. The Gap was one of the brands that expressed excitement about the new feature, using it that same day.
Rachel Tipograph, director of global digital and social media for Gap, told Mashable.
"Creating compelling video is a skill, often requires editing and sound mixing, and the import feature will change the game regarding the types of creative all users publish going forward. Brands can now be more planful by producing Instagram video content designed for the network, but also in service of business needs."
For better or worse, the option to record videos elsewhere and upload them to Instagram likely means that casual users will start to notice overly polished clips in their feed, as well more clips that may have aired elsewhere first. That said, brands we spoke with recognize that they can't just repurpose old videos for Instagram.
Sarah Hearn, social-media manager at Lululemon, which uploaded its first Instagram video this week, said.
"We're excited to create content specifically geared for Instagram, and also share those must-see moments from our product-education videos and coverage of community events. Instagram is where our community stories come to life, and just like we consider a beautiful photo for Pinterest, now we have the space to think about video on a more consistent basis."
Rumours have been flying around since December that Facebook is planning to launch in-feed video ads, so when Bloomberg reported last week that Facebook is set to sell them at $2.5 million a pop, it caused a stir within the industry to say the least. According to Bloomberg, two people “familiar with the matter” said that Facebook was planning to take on television’s dominance over advertising budgets.
Short form video itself has been of the most talked about areas of social media in recent months, not least because it’s developing so quickly on an increasingly visual social web. Until recently, Twitter’s Vine was really the only key contender in the short form video war.
However, it was Instagram Video that really made people sit up and pay attention to the commercial potential of short form video. Instagram has over 130m active users, offering a huge engagement potential. Combine this with Facebook’s active users, over 1.11 billion as of May this year - 61% of whom use the site on a daily basis – it’s an exciting proposition for advertisers.
Facebook’s current strategy of focusing on hashtags(#), a subject which I covered in a blog post dated March 21, 2013, and which has the potential to provide the platform with a much stronger connection to TV shows, as well as pushing Graph Search as a way to discover new film and TV content, means we’re seeing much more synergy with broadcast from the platform.
Twitter pioneered the use of hashtags, and most truly active Twitter users use them regularly to bring attention to their tweets (e.g. #SuperBowl, #Bachelorette, #AmericanIdol, #BarackObama, #FathersDay, etc.) during Twitter searches, usually accompanied with links to drive traffic to a blog, the originator's Twitter account, another Twitter tweet, or online article. However, it will take a while for most Facebook users to become familiar with hashtags, and use them like users on Twitter.
However, integrating TV ads into Facebook is not without potential issues. While brands have certainly become more clued up in recent years about making sure they use content relevant to the platform they’re using it on, simply replicating a 15 second TV spot on Facebook isn’t necessarily going to give the results they’re looking for.
Consumers expect to see advertising on their TV that may not be relevant to their personal interests and needs, because they accept that television is a mass-market, ‘lean-back’ medium. However, the average consumer is much more protective about their personal Facebook newsfeed, and could object to irrelevant, untargeted video ads appearing in place of updates from their friends. A focus on quality is going to be absolutely essential.
If this strategy is to be successful for Facebook, the platform must maintain the right balance between brand posts and content people see from their friends. Mark Zuckerberg recently said that he plans to limit the number of ads in the newsfeed to about one for every 20 post updates. The balance between the need to monetise the platform and to keep users happy has never been more delicate. I could not agree more.
Facebook has just reported bumper profits in the three months to June 30, with net profit rising to £217m. This time last year, it was making a significant loss. Zuckerberg and team are clearly on the right track, and the introduction of TV ads to the platform, if managed well by both Facebook and advertisers, will be another significant string to its bow.
This is not the first time that Facebook has hired an outside marketing firm to measure its reach and advertising effectiveness. In June 12, 2013, Facebook hired comScore to conduct a private study on its advertising effectiveness. This came about right after its terrible IPO (Good for Facebook, but bad for investors) during a period of heated debate about its effectiveness as an advertising platform. This all started when General Motors, on the eve of Facebook's IPO, cancelled its $10 million ad buy on Facebook, and claiming that Facebook ads, "Do not work."
Courtesy of an article dated August 2, 2013 appearing in MediaPost Publications MediaDailyNews, an article dated August 6, 2013 appearing in The Wall, an article dated August 10, 2013 appearing in Mashable and an article dated June 12, 2012 appearing in Business Insider
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