Facebook Inc (NASDAQ:FB) recently started testing auto-play video advertising in the news feed. Susquehanna Financial Group analyst Brian Nowak said in a research note to investors that he expects the social networking giant to generate more than $1.1 billion in video advertising revenues. Facebook Inc (NASDAQ:FB) is strongly positioned to benefit from the shift in advertising dollars from traditional TV to Internet.
Mobile and video key to Facebook’s growth
Advertisers are looking for more ways to spend on social ads. Facebook Inc (NASDAQ:FB)’s macro positioning with more than 1.2 billion users gives it a distinct edge. On average, users spend more than 392 minutes/month on the site, making it the leading social platform for engagement. Susquehanna expects social advertising to fetch at least 81% of online display ad spending growth between 2013-17. And Facebook Inc (NASDAQ:FB) alone is likely to drive 63% of that growth.
ValueWalk's Raul Panganiban interviews Kirk Du Plessis, Founder and CEO of Option Alpha, and discuss Option Alpha and his general approach to investing. Q1 2021 hedge fund letters, conferences and more The following is a computer generated transcript and may contain some errors. Interview with Option Alpha's Kirk Du Plessis
The Menlo park-based company’s advertising offering is also improving. Instagram is resonating well with advertisers. Simplified and improved ad pitch as “one-stop-shop” and higher quality ad units are expected to drive more ad spending on the social networking site. Facebook Inc (NASDAQ:FB) has more than 507 million active mobile users. Its mobile leadership will also help the company attract a bigger share of advertising budgets as more users shift to mobile. Advertisers prefer Facebook Inc (NASDAQ:FB)’s mobile ads over other platforms because it allows them to directly transfer sponsored story ad units from desktop to mobile without any hassle.
Big brands eager to spend on Facebook video ads
Nowak’s checks suggest that big brand advertisers are eagerly waiting to boost their Facebook Inc (NASDAQ:FB) spending through video. Susquehanna’s FY2014 revenue estimate of $10.85 billion, which is already above the Wall Street consensus, doesn’t include video ad revenues. But the research firm’s video ad model suggests that the company can generate $1.1 billion in video advertising in FY2015. That’s based on a conservative assumption of Facebook Inc (NASDAQ:FB) selling video ads at $8 CPM (compared to other online video ads sold at $20 and higher), and if 50% of video ads are substitutes to the current sponsored ads. A higher CPM may increase the upside potential.
Susquehanna has a Buy rating on Facebook Inc (NASDAQ:FB) with a $68 price target. Another research firm, Raymond James, recently listed the social networking giant among the top Internet stocks for 2014.
Facebook Inc (NASDAQ:FB) shares rose 1.02% to $56.50 in pre-market trading Tuesday.