The WSJ is reporting this morning that Facebook Inc (NASDAQ:FB) will announce today the launch of video ads on the Facebook Inc (NASDAQ:FB) property, with the launch date being this Thursday. This is consistent with analysts and most expectations and analysts at Citi remind investors that they analyzed the potential impact of launching a video ad product for Facebook and Instagram in their recent report titled The Path to $70, published on 11/01/13. In that report analysts stated that “Like on Instagram, we expect Facebook to introduce video ads into its desktop and mobile News Feed“.
This is particularly important as video CPMs often are 2-5x higher than standard display ads. In this analysis Citi estimate that the introduction of video ads on Facebook Inc (NASDAQ:FB) could result in $510mm, $744mm, and $1bn in revenue upside to CY14, CY15 and CY16 estimates, respectively.” Also in that report, analysts estimated that the introduction of video ads on Instagram could add $27mn in revenue in CY14, $134mn in CY15, and $335mn in CY16. Importantly, neither the Facebook Inc (NASDAQ:FB) or Instagram video ad forecasts above and in the Path to $70 report are included in their current published estimates.
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Cantor reported, Facebook has recently ramped up the News Feed ad load and the embedded video ads to position itself appropriately for the Holiday Shopping Season, which bodes well for 4Q results. FB remains a 2014 top pick for Cantor, with its attractive growth/margin prospects and compelling valuation.