Video advertising is the next big thing for social media companies

The future of video ads

While Google’s (GOOG) YouTube is already leading the online video advertising space, Facebook (FB) last year announced it’s foraying into video advertising in a move to cut into television ad dollars. It has been in the process of developing a number of features for TV networks and shows to help increase users’ engagement on the social network. Some of the features include sending reminders to users about upcoming episodes of shows that participate in the scheme after users “like” the shows’ Facebook pages.

Facebook is also providing data on user actions related to TV shows to selected TV networks. Facebook introduced new APIs (application programming interface) last year that will allow selected news organizations to integrate Facebook conversations into their broadcasts or coverage by displaying public posts of real-time activity about any given topic. These partners can also use these tools to show the number of Facebook posts that mention a specific word over a period of time, including a demographic breakdown for the people talking about that topic.

In a leaked presentation acquired by various news media sites in December, Facebook took on the ad spends made by brands on television and YouTube, and showcased its own ad targeting capabilities and the benefits of its mobile news feed. The sales deck stated that Facebook is seeking ad budgets of more than $1 million for videos.

Industry experts contend that Facebook’s entry into video advertising would also impact Twitter’s Promoted Trend for ads that can include video but doesn’t have Facebook’s autoplay feature. Twitter is already in the television space through its partnerships with Comcast and NBCUniversal last year that lets users tune in to a TV show directly from a Tweet. Called See It, the feature is designed to integrate with other video distribution partners, television networks, and websites. Twitter also has an agreement with Nielson for Nielsen Twitter TV Rating, an industry-standard metric based entirely on Twitter data. Twitter launched TV ad targeting and TV conversation targeting last year that make it easy for networks and brands to connect with Twitter users already engaged with TV. However, industry experts believe Twitter has yet to fully monetize on the video content for ads.

According to a report last year by BI Intelligence, $350 billion was spent on TV ads globally in 2012. The report states that if social TV can make advertising more effective, then it could become a major business in its own right.

eMarketer said that social network advertising is unique because advertisers need to tailor the ads in context to what the user wants to view. So sponsored video content could be a suitable way for advertisers to integrate and ingratiate themselves within social network users’ information feeds. eMarketer said in 2012 that it expects spending for video advertising—both desktop and mobile—to rise from $2.93 billion in 2012 to $8.04 billion in 2016.

According to analysts, Facebook is poised to benefit from its expanded advertising offerings. Susquehanna International Group analysts recently raised the price target based on an “improved and simplified ad pitch as a ‘one-stop-shop,’ attribution and ROI progress, higher quality ad units, and ‘greenfield’ opportunities like Instagram that are resonating well with advertisers and set to drive more dollars onto Facebook.”