This week there were reports about a study commissioned by Facebook Inc (NASDAQ:FB) which showed that the social network will be able to deliver “site reach at levels comparable to major TV networks.” The implication of such a study could mean that the company could start stealing some advertising revenue from the television industry, but analyst Brian Wieser at Pivotal Research Group this this is a bit of “a reach.”
Facebook to price video ad units high
He notes that the news about the study, which was conducted by Nielsen even though Facebook actually commissioned it, came out around the same time as news about how much the company could charge for its video ad units. Facebook Inc (NASDAQ:FB) could introduce video ad units which are priced between $1 million and $2.5 million per day.
Wieser believes that this overstates the opportunity provided to the social network. He said his model for the company has included incremental revenue from video ads, but he believes it will be more modest than some currently believe. As such, he said they’d rather wait to hear official news from Facebook Inc (NASDAQ:FB) about the trends before making adjustments to their model.
Why Facebook might see more modest gains than expected
The analyst explains why Wall Street might be overstating how much of a benefit Facebook Inc (NASDAQ:FB) could receive from these two bits of news. First, he said that even the claim that Facebook reaches more people during the day than some television networks provide just a “selective way of looking at the industry.” He notes that time of the day is just the first cut used to set budgets, but there are other factors like workflows which must be considered. He also said different media influence customers in different way, so it doesn’t really make sense to compare Facebook Inc (NASDAQ:FB)’s online video ads with those on television.
He also believes that if the results of the study are correct, it’s more likely that advertisers would shift their spending from television to other online video publishers rather than Facebook. He notes that Facebook Inc (NASDAQ:FB) is good for targeting very specific customers but that television advertisers are casting a broader network. Therefore, he thinks that YouTube or one of the many other online video outlets like the various video ad networks would be more likely to steal ad revenue from television.