Facebook’s Instagram Video Opens Door To Lucrative Video Advertising

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Facebook Inc (NASDAQ:FB) recently added video sharing capability to Instagram. RBC Capital Markets analyst Mark Mahaney said that the video capability will make Instagram even more compelling. The popular photo sharing app will now also allow users to record, upload and share 15-second video clips. Facebook Inc (NASDAQ:FB) said that videos will have the same capabilities as photo sharing. Videos on Instagram will have as many as 13 filters to change the feel and look of the video. It will also have a set of cover frames to differentiate video thumbnails in the news feed.

Facebook's Instagram Video Opens Door To Lucrative Video Advertising

Facebook Inc (NASDAQ:FB) has placed a 15 second maximum and 3 second minimum limit. The social networking site said that the company decided video length based on the user’s ability to tell a story and mobile upload time. The service will be available on Android and iOS platforms.

Facebook to Start Video Advertising?

Though Facebook Inc (NASDAQ:FB) doesn’t currently focus on advertising on Instagram, RBS analysts believe that it has paved the way for the social networking giant to enter the lucrative video advertising niche. Introduction of video will lead to greater user engagement, which will form the base for Facebook’s video advertising business. Analysts said that Instagram will be a major long-term contributor to Facebook Inc (NASDAQ:FB)’s revenues. Mark Mahaney said that video is the next big opportunity on the internet, which could generate up to $5 billion in revenues. YouTube is a fine example of emergence of videos and video advertising on the internet.

Over the long term, RBS says that a major chunk of the $200 billion a year TV advertising industry will migrate online. Currently Google Inc (NASDAQ:GOOG) is the best play in video advertising market due to YouTube. But Facebook Inc (NASDAQ:FB) may capture a large market share in coming years. Instagram may also snatch some video-hungry users from Vine and Twitter’s video sharing app. However, analysts see an execution risk with Instagram.

Instagram currently has 130 million users, and it is not monetized yet. Future monetization of this service will boost Facebook Inc (NASDAQ:FB)’s revenues. RBS Capital Markets remains optimistic about the social networking giant. It has an Outperform rating on the stock.

Facebook Inc (NASDAQ:FB) shares were up 1.79 percent to $24.33 at 1:08 PM EDT.

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