Facebook (NASDAQ:FB) rolled out a new feature this summer that should have its shareholders buzzing. Users scrolling through their Facebook news feeds -- and on any given day we're talking about an average of 829 million of the site's 1.32 billion monthly active users doing exactly that -- are seeing Facebook-hosted videos begin to play automatically.
It's not as bad as it sounds. The videos play silently, and only as you scroll past them. It's little more than a moving picture in every sense of the term. It's up to the user to click on the video to play it in its entirety with audio.
It works. Who cares if a video starts to stream when a user scrolls through a news feed? If a high school pal wants to share his niece's first steps or your motorbike-loving cousin wants to pass on a viral clip of a tap-dancing dog is it really any different than still snapshots on your news feed?
However, Facebook has a grander purpose. The pre-roll videos may seem like a fun novelty now, but just wait until the leading social network site's marketing team gets behind the feature.
Ad it up
Facebook knows what it's doing. It's just starting to scratch the surface when it comes to turning eyeballs into dollar signs. Its base of monthly active users has only climbed 14% over the past year, but revenue has actually soared 61% over that time with ad revenue growing even faster than that.
Users may sometimes complain about the sponsored intrusions, but at the end of the day they realize that putting up with marketing missives comes with the territory of enjoying an otherwise complimentary platform. From over-the-air TV to terrestrial radio, these diversions exist as freely available platforms because we're willing to absorb advertising.
Facebook has been hinting at video ads for a long time. David Fischer -- Facebook's VP of marketing -- was being interviewed by TechCrunch's John Constine at The Future of Media conference in February of last year when he didn't deny that video ads were in the works.
"Right now the Facebook home page is pretty static," Constine asked. "No autoplay videos. No animated GIFs. Could Facebook run autoplay video ads without overly distracting users from their friends' content?"
"I believe there are ways we could do it," Fischer responded. "There are ways that could be destructive and distracting to the user experience. But there are ways that could potentially balance user experience with advertiser experience. We haven't put a product out yet because we haven't had one we're comfortable with. But if we could, then we would do it."
Well, it seems as if Facebook is comfortable about it now. Rolling out autoplay videos by users is the first step. It's the trojan horse, making 1.32 billion people comfortable with moving pictures on their feeds. Just wait until Facebook turns on the spigot.
Accepting Facebook's friend request
It's been more than two years since Facebook went public at $38, and a lot of investors didn't get it at first. Instead of moving higher, shares of the leading social networking website operator began to drift lower.
David Gardner and his team of Motley Fool Rule Breakers analysts -- a group of pretty smart and successful investors that I've been honored to be a part of since the newsletter service's inception 10 years ago -- didn't agree with Wall Street's bearish view of Facebook. We recommended the stock two months after it went public when it was trading well below its IPO price. When the stock got even cheaper three months ago we rerecommended the shares. The move has clearly paid off.
Shares of Facebook have gone on to more than quadruple since bottoming out in the high teens nearly two years ago, and if this new advertising initiative takes off the stock could move even higher.
The push for autoplay ads does have one drawback: data. It takes bandwidth to make videos move, and that's something that users with slow connectivity or bumping against the ceilings of their data plans are already starting to complain about. If they get peeved when a co-worker shares a road rage clip they're going to blow a gasket when a video ad is playing on their dime. Facebook provides the option to turn off the feature, but most will likely accept the autoplay media.
This is like the early days of television, only this box just happens to know who you know, where you've been, and what you're into. Yes, this is going to be a pretty big deal.
Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Facebook. The Motley Fool owns shares of Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Returns and holding information as of 09/15/2014.