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Facebook Boosts Video Efforts, to Sell Ads for Other Firms

Facebook, Inc. FB is planning to sell video ads for third-party companies per a Wall Street Journal report. This is the first time that the company will be placing ads for other companies, of course for a share of revenues.

While the details of profit sharing have not yet been disclosed, we can speculate that Facebook will be taking at least 30% of the revenues generated through these ads (this is the revenue sharing arrangement for existing display ads).

Given Facebook’s massive user base, we expect the company to benefit from the volumes as well. Moreover, to get the most out of it, Facebook is offering options of “in-stream” and “in-article” video ads to marketers. That is, apart from the conventional video ads on the platform, publishers can also market their offerings through video ads with Instant Articles. This would also likely add value to Facebook’s Instant Articles feature, which is now increasingly being used by publishers to share their content.

Facebook has taken a lot of initiatives (like introducing live videos) to build its position as a video serving platform. Per the latest statistics, as many as 100 million hours of video are watched on Facebook each day. This creates the backdrop to pursue video ad dollars. Generally, video advertisements are more engaging than other forms of digital marketing, so marketers are willing to pay much more for them.

Interestingly, this move pits Facebook directly against Alphabet GOOGL and some other companies in the battle for video ad dollars, making for tougher competition with higher stakes for all involved. 

Facebook sports a Zacks Rank #1 (Strong Buy). A couple of similarly-ranked stocks in the broader technology sector are Yirendai Ltd. YRD and PetMed Express, Inc. PETS.

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PETMED EXPRESS (PETS): Free Stock Analysis Report
FACEBOOK INC-A (FB): Free Stock Analysis Report
ALPHABET INC-A (GOOGL): Free Stock Analysis Report
YIRENDAI LTD (YRD): Free Stock Analysis Report
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