Online Video Ad Sales Are Expected to Take Bite Out of TV

Facebook is expected to generate about $3.8 billion in revenue from video advertising by 2017. That figure represents triple what the company is projected to take in this year. Nomura analyst Anthony DiClemente wrote that Facebook has the potential to boost video ad sales “with only modest cannibalization of other ad revenue sources.” Nomura also projects that Google-owned YouTube will more than double its 2014 revenue to $8.5 billion by 2017. Increased spending for online video ads could impact traditional spending areas such as TV.

videostream“In our view, Facebook and YouTube will likely be the largest players in online video, providing differentiated offerings with respect to pricing, targeting and engagement,” wrote DiClemente.

“The analyst firm estimated that Facebook’s video ads carry a cost per thousand (CPM) in the range of $22-$28, in line with other premium digital-video inventory and primetime broadcast TV, whereas YouTube’s CPMs average $15-$20,” reports Variety.

According to DiClemente, Facebook has the potential to offer advertisers better targeting, since users are logged in while accessing their newsfeeds. However, YouTube could offer better completion rates since users go to the site specifically to watch videos and typically keep their audio turned on.

“In the past two months, Facebook has inked deals to bring premium video to the service,” notes Variety. “Those include pacts with MSNBC for a pair of daily Web series; ABC to live-stream ‘The Oscars Backstage’; and ‘Access Hollywood’ for a behind-the-scenes daily show.”