Facebook For Business is building upon its value proposition for marketers. Image source: Facebook
Facebook's (META 3.02%) growth has been well-chronicled. On the back of strong advertising revenue, which now comprises 95% of Facebook's revenue haul, the company has grown its top line 40% on a year-on-year basis through the first half of this fiscal year, pulling in nearly $7.6 billion in revenue versus $5.4 billion in last year's corresponding period.
From an operational standpoint, perhaps the biggest development for Facebook over the last year or so has been the tremendous growth in its native video hosting platform. Earlier this year, the company boasted its service had surpassed 4 billion daily video views, up from 1 billion in September 2014, putting Alphabet's YouTube firmly in its sites for video-hosting supremacy.
Facebook's video growth hasn't always been smooth: The company has had a contentious relationship with content creators that fill YouTube, as Facebook seemingly lacks a defined revenue sharing policy and a firm policy to prevent "freebooting." However, the news as it relates to advertisers is decidedly more optimistic.
Facebook's real customers -- advertisers -- are seemingly not concerned
Facebook's real customers, as in who actually pays the company, seem unconcerned with these issues. Interestingly enough, a new survey jointly published by analyst firm RBC Capital Markets and advertisement-related publisher Ad Age found Facebook tops YouTube among advertising professionals from a return-on-investment standpoint.
According to the survey, 11% felt Facebook's video ads were significantly better than YouTube, while an additional 25% that felt ads on the platform performed somewhat better. On the other hand, only 6% and 15% felt YouTube ads performed significantly and somewhat better, respectively.
And that's important as advertisers look to transition their ad spend from television (more on this later) to digital video ad spend. eMarketer predicts 2015's digital video ad spend to increase to $7.8 billion, up 34% on a year-on-year basis. The company expects growth to slow to 12.1% in 2019, topping $14 billion in 2019. If Facebook is able to offer a better ROI -- or simply a better perceived ROI -- this could be a boon to shareholders.
It's not just YouTube that should be worried about Facebook
However, YouTube may not be the one with the most to lose in eMarketer's data. In the end, it may be television and the supporting monetization chain that get hurt in the upcoming years. Nielsen (via Ad Age) portends future struggles for networks with two highly coveted demographics.
Per the study, in a typical month, 14.2% of millennials can be reached with Facebook only, versus 12.2% who can be reached using TV only (TV is defined as the top 10 networks). For Hispanics, those numbers are 17.5% and 16.3%, respectively. Overall, a combination of TV and Facebook still is the best way to reach these two groups, but if a mutually exclusive marketing decision occurs, Facebook could further win ad spend.
On a demographic basis, Hispanics and millennials are two highly coveted groups, as they are expected to grow in both population and in spending power. In addition, both groups are younger than the median age of the U.S. population (one by definition) and are growing more rapidly than other demographics as well, according to Ad Age. If Facebook is a better outlet to reach these consumers, through video and other ad-based delivery, eMarketer's estimates of digital ad growth could be low and Facebook's top line could continue to grow at its rapid clip.
