- AOL displaces YouTube to get the top spot in video ads.
- AOL achieves no. 1 spot due to its acquisition of Adap.TV
- Video ads will be a key generator of revenues going forward.
Online video viewing has been on a rise with competitors like YouTube, AOL, Facebook, and Yahoo fighting for the top spot. ComScore (NASDAQ:SCOR) video metric yesterday released the November rankings for the video content viewers and advertisements in United States. Total online videos continue to rise each month, with 47.1 billion videos watched in November, and 26 billion video ads which are roughly 2.5 times greater than a year earlier. In total, 87.1% of the U.S. Internet audience viewed online video, with average duration per video of 4.4 minutes and average duration per video ad at 0.4 minutes.
Google’s video viewing site, YouTube has been on the top spot, with 163.5 million unique users across United States. Second in line was AOL with 73 million users, followed by Facebook with 66 million users. However, AOL has left behind Google and Facebook in the video ads ranking with roughly 4 billion ads, which was achieved with the successful integration of AOL’s acquisition of Adap.TV in September 2013. However the increase in video ads view owes more to the frequency of ads per viewer than increase in reach among the US population. We review the opportunities online video content presents to the top players in the industry.
YouTube growth ahead
YouTube (NASDAQ:GOOG) ranked No. 1 in both viewers and video ads, up until September 2013. However, AOL has now captured the first spot in video ads, followed by YouTube. YouTube registered 3.6 billion video ads in November 2013, up against 2 billion a year ago. If it continues to grow at the current rate, YouTube will soon grow to be at the top spot again. Although Google does not directly report YouTube’s revenues, a study by eMarketer expects YouTube gross revenues for 2013 to be $5.6 billion, and net revenues of $1.96 billion, after deducting traffic acquisition costs. In 2012, the company had gross revenues of $3.70 billion, and net revenues of $1.18 billion. This tremendous growth of YouTube is driven by growing consumer demand for video content across devices, and through features such as Paid channels and True View. YouTube ads are now posing a threat to the traditional TV ads with advertisers now buying time slots to targets teens who are slowly shifting from television to online viewing. YouTube is a key revenue source for Google, and going forward, we expect Google to strengthen with the growth in YouTube.
Based on comScore Video Ranking November 2013
AOL no.1 in video ad ranking
AOL (NASDAQ:AOL) is on the No.1 spot in video ad ranking by comScore. It served 4 billion videos ads in November 2013, against 3.6 billion video ads by Google. This boost has mainly been due to the acquisition of Adap.TV in September 2013. Also, inclusion of premium video content has helped AOL increase its target ads. However, total videos served at 1.34 billion were way lower than 14.74 billion videos by Google’s YouTube. AOL can capture a bigger share of the market only by increasing total videos and unique user base, to overcome the increasing pressures of competition from YouTube.
Based on comScore Video Ranking November 2013
Facebook’s New Video Advertising Strategy
Ranking 3rd spot in the unique video users, Facebook (NASDAQ:FB) has come a long way in video display. The company has recently launched a fresh video ad format, designed to minimize disruption in the user experience in the platform. The new video ads will show as a part of the user’s newsfeeds and will auto-play as soon as the users scroll into view. But the audio does not play, unless it is clicked. And if the users do not wish to view the ads, they can just scroll down. However, it seems like a good video ad strategy, especially compared to YouTube, where one has to forcefully sit through the initial 10 to 15 seconds of the ad. If Facebook is able to monetize this successfully, without hurting its users, it’s a lucrative move with respect to its investors. Although the company has not reported how much it will charge per ad, Bloomberg expects 15-second video ads which will be shown thrice a day to make $1.5 to $2.5 million per day. This will add up to $400 to $600 million of revenue. The investors are positive on this news, which has led to Facebook’s stock price gain of 15% over last five days, trading at $55.57 on December 18th. Currently, Facebook is not a part of the top 10 video ad ranking by comScore. But with this launch, we expect Facebook to progress towards taking over its competitors soon. View our detailed Facebook stock analysis.
With the growth in digital ad media, the importance of video ads are more evident. As the consumers increasingly watch content on internet, the demand for video ads will grow further. This trend will generate revenue and earnings far into the future and make the market more competitive. Hence, we expect all the three companies to benefit from the growth in video ad industry. However, we are strongly bullish on Google, with Google being one of our top stock picks. View our top stock picks.
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