Although many social media stocks experienced a rocky November,
several have taken off once again to start December, rekindling
hope of another bull run in the space. In particular,
, is seeing strong momentum to open up the month, and is up double
digits already in December.
And given some recent news from this social media giant, there is
some reason to believe that the run can continue. After all,
Facebook just announced a new avenue for revenues which could add
to the company's bottom line and help FB to grow even more.
New Type of Ads Coming to FB
FB just revealed that they will be
testing their first video ads
this week, putting video advertisements directly into users' news
feeds. This could be a great second act after the company's huge
burst of revenue once it really figured out the mobile advertising
game, though this make take a while to get up to speed too.
How It Will Work
It should be noted that, according to Facebook, as users scroll
down through their news feed, videos will begin to play as they
appear on screen, without sound. However, if you click or tap on
the video, the sound for the video will play.
After the video is over, users are given the option to watch two
more from the same marketer. This is done in order to make it 'easy
to discover more content from the same marketer' according to
And for users on mobile devices, it is important to point out that
videos will be downloaded in advance, only when the device was
connected to WiFi. This means that Facebook users will not have to
worry about their data plans being eaten up by the ads.
Lastly, the initial video ad push is just a test with a limited
number of advertisers, and that it isn't currently going to go out
to every video ad pr page post video. So if the first test flops,
FB may have to revisit the idea.
The video ad market is huge, and with Facebook's massive user base,
it is pretty reasonable to assume that many will be lining up to
try out this new advertising type. Initial investor reaction seems
to be relatively positive too, as FB was up as much as 2% in
Tuesday trading on the news.
However, there is obviously a concern about enraging users with
even more ads. Facebook users already are hit with ads in their
news feeds, and there are already some concerns about reaching a
breaking point, so this certainly isn't going to help matters.
The news could put more pressure on other social media stocks to
expand their advertising though, and to dive into video ads as
well. This could be true for
to an extent-given their low level of ads in users' feeds right
given the company's lack of profitability and need to grow revenues
(though the appeal of video ads on Twitter is questionable at
I think that the video ads are a solid idea for FB to grow
revenues, and I do not think the intrusion level is that high.
However, I only think this will be the case if the videos do not
play sound upon scrolling over them.
Videos without the sound are relatively low on the annoyance scale
(at least for me) though it shoots up if sound automatically comes
on. But, you do notice when something on the screen is moving among
a full page of static text and photos, so it could command a
reasonable premium, and really help FB become more profitable.
Given this, I am relatively optimistic for FB's revenue growth
thanks to these videos, assuming the test goes well and the
majority of users do not find them too intrusive. I am also
interested to see if this causes any analysts to revise their
estimates for FB, as currently the estimate trend is very positive
already with FB possessing a Zacks Rank #2 (Buy), so more good days
could certainly be ahead for this social giant.
But what do you think?
Will video ads be a game changer for FB stock in a positive way? Or
will users abandon the platform thanks to a high annoyance factor?
Let us know in the comments section below!
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