Facebook Is Now Going After TV Ad Dollars

  • Facebook has partnered with Nielsen to bring a new joint Facebook/TV ad format on Facebook's platform.
  • Despite the growing popularity of video ads, TV ad spends will still outpace video ad spends in 2018 by a big margin.
  • The new ad format will help Facebook to double-dip into the video ad market and the huge TV ad market and create more growth runways for the social media company.

Facebook (NASDAQ:FB) has lately been making good inroads into video advertising, which promises to be the company’s next big thing. The company has either launched or announced plans to introduce several key video ad platforms including Suggested Videos (FB’s answer to YouTube), mobile video ads, apps that combine video and virtual reality, and Dynamic Product Ads. There is little doubt that video ads present an enormous opportunity for FB due to their much higher CPM rates compared to standard ad formats, as well as keen interest by marketers in the new ad format. Indeed RBC’s Mark Mahaney predicts that video ads opportunity for Facebook will be as large as mobile ads in about three years, a sentiment which seems plausible given that 54% of marketers have reported being ‘‘likely’’ or ‘‘very likely’’ to buy Facebook video ads over the next 6 months while another 72% are interested in Instagram ads.

But Facebook is not just content with digital advertising but wants to cover all bases. The social media giant now has announced a partnership with NIELSEN HOLDNGS (NYSE:NLSN), long regarded as the de facto arbiter of TV success, to allow marketers to run joint Facebook/TV ad campaigns using Nielsen’s popular traditional target rating point (TRP) TV ad buying system. Facebook says that the new solution will initially launch for news feed video ads and later be available on Instagram during Q1 2016.

The new tool allows brands and agencies to buy ads that are aimed at reaching certain demographic groups (TRP) and also offer advertisers the option to directly buy Facebook ads. Nielsen’s services will be used to verify ad delivery and compare the results with standard TV campaigns. Facebook says that an experimental run of 42 joint Facebook/TV ad campaigns yielded an impressive 19% increase in targeted reach by the ads compared to TV-only campaigns. Additionally, such joint ad formats were found to be twice as likely to reach their target audiences.

Facebook and brand advertising

Facebook has become a hugely successful digital advertising platform, thanks mainly to retargeting ads, app downloads, and other ad tools that set it apart from competing digital ad platforms. Facebook has mastered the art of direct response advertising, which makes up the lion share--60%-- of digital ad spending. But brand advertising is where the real ad dollars are. eMarketer estimates that despite the growing popularity of digital video advertising, TV advertising spend will still outpace it by a 7:1 margin by 2018.


Source: eMarketer

While Facebook remains a force to reckon with in direct response ads, many media buyers are currently not quite sold on the social platform as a home for creative brand awareness campaigns. Facebook used to peddle likes to brand pages in a bid to have brands develop a one-on-one relationship with consumers. But the company has been paring down the reach of brands to customers--at least for free. Brand ads placed to the right of Facebook users’ news feeds are just too small and uninspiring to make a serious impact. There is also the not-so-small issue of the difficulty involved in measuring the effectiveness of brand ads compared to direct response ads. The new solution helps marketers pair the popularity of Facebook video ads with the ubiquity of TV ads while offering a way for marketers to measure the ROI of the twin-format.

It’s hardly surprising that Facebook has first introduced the new system to feed-based ads. One big reason why Facebook ad revenue has kept growing at a healthy pace can be chalked up to the large increase in feed-based ads. As the overall usage gradually shifts from desktop to mobile, the total number of ad impressions has been decreasing. The average ad pricing is, however, has been going up. In other words, Facebook is less cluttered with ads than before, which has improved the ROI for marketers and made them more willing to pay higher rates. The total number of ad impressions has been falling every quarter but the even larger increase in price per ad has been helping the company’s top line growth to remain healthy.

Bottom Line

While Google (NASDAQ:GOOG) still remains the largest digital ad platform, Facebook is quickly moving to close the gap by offering a better platform with a higher ROI for marketers. The strategy seems to be working--the number of advertisers on Facebook’s platform increased from 2 million in February to 2.5 million currently. Facebook has been trying hard to cover all ad bases by developing a near-complete ad platform. This should give the company years of uninterrupted growth runways, making it a good long-term investment.

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