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Facebook Inc (FB) Wants Video Ads

Online video and television advertising represents a market of $70 billion in the U.S. alone, and Facebook Inc (NASDAQ:FB) is looking to grab a piece of the pie. With the company poised to take advantage of huge video ad opportunities over the coming year, greater emphasis is being placed upon video playback features.

Facebook Inc (FB), JetBlue Airways Corporation (JBLU)

On September 12, 2013, Facebook Inc (NASDAQ:FB) stated that testing was underway for a new video platform for the popular social media website. This new feature consists of playing videos on user’s news feed automatically, albeit without sound. In order to deactivate the silent mode and play the sound, users simply have to tap the video. This will not only return volume, but will make the video play in full screen. The new app will be tested by users over the coming weeks, through Facebook’s mobile application. Later on, it will also be available for desktop news feeds.

Although such advertisement units have been in the making for quite some time now, CEO Mark Zuckerberg is still concerned about user experience. Because, advertisement objectives are the motive for launching the new feature users should expect up to three 15 second video ads per day from a single advertiser. And, the company is worried this might annoy its 1.1 billion users. However, the firm also anticipates these ads to generate additional revenue of $1-2.5 million per day, making it a very lucrative business.

The news were well received by analysts at Wedbush, who rose Facebook’s target price from $39 to $49. Similarly, Goldman Sachs incremented Facebook’s valuation from $46 to $52 earlier this week. However, Facebook Inc (NASDAQ:FB) will also be losing a key employee next Wednesday. The departure of Justin Shaffer, the product manager for the firm’s video ad product, comes as a surprise and could frustrate advertisers further if it results in additional delays.

Although the company is keen on completing the new video feature, we should expect Mark Zuckerberg to take his time with this latest project. User alienation is a key concern for the CEO and finding the right balance between commercial opportunity and consumer satisfaction will not be easy.

Disclosure: Pablo Erbar holds no position in any stocks mentioned

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