In Topeka research’s note on Facebook Inc (NASDAQ:FB) yesterday, Three Catalysts For 2014; Buy, analysts cited auto-play video ads as a catalyst for 2014. Today, the Wall Street Journal is reporting that Facebook Inc (NASDAQ:FB) will launch auto-play video ads this Thursday with an inaugural ad for the film Divergent from Lions Gate (USA-$28.51:NR).
The WSJ is quoting a $2mm per day figure for advertisers to reach the 18-54 demo. Other press reports in the past have stated that Facebook Inc (NASDAQ:FB) is seeking $1mm-$2.5mm per day for mass reach. If those other press reports are accurate, then Facebook Inc (NASDAQ:FB) could generate up to $900mm (range of $365mm-$900mm) annually from video ads. Taking this down to the valuation level, video ads could be worth up to approximately $3 per Facebook share. Analysts have not factored in video ads into their estimates for Facebook, thus video ads will be incremental.
Facebook Ads
Along with Instagram ads (graphic and video) and advertising efforts tied to Social TV, in 2014 Facebook Inc (NASDAQ:FB) will be wellpositioned to capture a slice of the greater than $65B in advertising levered to TV in the U.S. Globally, that figure jumps to over $230B per IDC. Measurement, or proving that ads ultimately led to a sale, has been a sticking point in getting those ad dollars (from large brands) to flow towards Facebook Inc (NASDAQ:FB) and other digital media platforms, in a meaningful way.
Facebook’s efforts to link the Custom Audience ad unit to businesses CRM systems will help with measurement, and will help show that users who viewed an ad eventually made an instore purchase. Google Inc (NASDAQ:GOOG)’s (GOOG-$1,072.98:Buy) efforts with Estimated Total Conversions and Twitter Inc (NYSE:TWTR)’s (TWTR-$56.61:Buy) efforts with Tailored Audiences have similar goals.
