In a broad sense, the Internet has always competed with traditional media. The social giant, however, aims to become a much more direct competitor by introducing video ad buying with sales and tracking metrics that more closely resemble the ones television ad buyers are used to.
These moves should open up a whole new world of potential for Facebook, which could be bad news for traditional broadcasters. The new products and metrics could also increase the competition between the social leader and Google's YouTube brand, which has long offered TV-style commercials.
What is Facebook doing?
Essentially, the social media giant is trying to peel off a piece of the television video advertising business in two ways. First, it's acknowledging that TV advertising works, but it's touting new research from Nielsen (NYSE:NLSN) that suggests supplementing TV campaigns with Facebook video ads "drives incremental reach, increases efficiency and improves effectiveness," the company said in a blog post.
Second, the company is delivering metrics that are closer to the ones used in purchasing ads on traditional television shows. Broadly, buyers use ratings from Nielsen to determine how many people watch a given program, and then use that number to set the value of the ad. Some ads are bought on a gross rating point basis (GRP) -- where the price is by total audience. Others are purchased based on target ratings point (TRP), which AdWeek defined as "a specific consumer audience within a gross-rating point."
Facebook is now selling video ads "using target rating point as the metric," according to the company. The social network has also partnered with Nielsen -- the same company that provides the most widely accepted ratings for traditional television -- to measure and verify if the ads reach their intended audience both on the social media site and on TV.
It's an attempt to speak to buyers in the language they are used to speaking while also throwing out data designed to get buyers to modify their habits and add Facebook into the mix as part of traditional campaigns. The company made a number of points in the blog post based on Nielsen research it commissioned, which examined 43 separate joint TV/Facebook ad campaigns. The findings included:
- Facebook impressions were "twice as likely to hit their target audience than TV impressions."
- When ad buyers combined TV and Facebook ads, they saw a 19% increase in targeted reach versus TV alone, with the number for Millennials as the target audience jumping to a 37% increase.
The social leader also argued that joint ad campaigns made ads more memorable and the brands more likable, according to the Nielsen research.
Why is Facebook doing it?
Video advertising is growing, and Facebook wants a bigger piece of the pie. By positioning itself as an enhancement to television ads instead of just targeting buyers spending money with YouTube and other online video sites, it opens up a much larger universe.
Even though digital video advertising will increase by 13% to nearly $15 billion by 2019, according to eMarketer, that number remains small compared to the $78 billion USA TODAY reported the same research company said would be bought in traditional advertising in the same year.
Facebook does not just want to increase the amount of revenue it gets from the various advertisers' Internet buckets, it also wants to cash in on the amount they have allocated for television spending.
Will it work?
Facebook is playing this very smart. Instead of selling buyers on a new set of metrics, which has traditionally been how the Internet pushes its ad units, it's letting its ad effectiveness be judged in the same way TV ads are.
In most cases on the Internet, that would be a risk since few sites have the engagement delivered by a television show. A pop-up video ad on a site you visited via a search for something specific is unlikely to be as effective as an ad offered during a specific program you watch.
Facebook, however, can target viewers even more specifically than television can. It has an engaged audience and can, in theory, deliver them video ads that will enhance their experience rather than being random or obtrusive. The same argument can, of course, also be made for YouTube, and ultimately, these moves simply continue blurring the lines between digital and traditional broadcast ads.
Media buyers on television have used ratings as a tool for buying since the 1950s. By offering that, and delivering enhanced metrics that prove efficiency, Facebook should be able to take a percentage of the dollars that would have otherwise gone to TV.
As long as it delivers results -- and the social leader is well-positioned to do that -- there is no reason to believe Facebook won't be able to increase ad revenue with this approach.
Daniel Kline owns shares of Facebook. He tries really hard to avoid video ads online. The Motley Fool owns shares of and recommends Alphabet (A and C shares) and 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.