Why Facebook Might Not Be Using the Social Graph for Video…Yet

FacebookOne of the most interesting aspects of the coverage of Facebook’s impending video advertising launch wasn’t how they’ll reportedly be using autoplay formats, or that the ads will be fifteen seconds long – it’s the relatively limited targeting options available to buyers. According to two separate reports, one from Bloomberg and another from Ad Age (a Facebook spokesperson told VAN said the company wasn’t willing to comment), video advertisers won’t be able to tap into Facebook’s famously rich pool of social data and will be confined instead to targeting users according to age and gender.

There are a couple of possible reasons that the social giant might have decided to offer a trimmed down offering, rather than making full use of Facebook’s social graph (i.e. the data that links people according to their personal relationships, likes, interests etc.):

1. Facebook want to create a product that can be presented to existing TV and video advertisers – many of whom currently buy based on age and gender – so they can can compare Facebook inventory with the rest of their plan on an ‘apples to apples’ basis.

2. Age and gender are the audience attributes measured by Nielsen Online Campaign Ratings (OCR) and ComScore’s Validated Campaign Essentials (VCE). While advertisers might be inclined to question the true value of a ‘like’, age and gender are two things that Facebook can target on with a high degree of accuracy (Nielsen’s OCR actually uses Facebook’s data to verify the age and gender of audiences).

3. A third possibility is that – even with Facebook’s huge scale – allowing buyers to target beyond age and gender would limit the amount advertisers spend. Remember, this is Facebook’s big push to win TV budgets, and the TV industry got where it is today by offering brands unrivalled scale and reach, not by enabling brands to cherry-pick individual users based on their likes and interests.

The third issue above is a dilemma that publishers have been struggling with since the dawn of RTB:  how do publishers – many of whom are struggling as it is – generate a sustainable revenue stream from data-driven advertising? Is it possible to secure large, guaranteed budgets, whilst also allowing buyers access to target the users most valuable to them?

While these concerns have been discussed to death in display (and there are still no clear ‘one size fits all’ answers), premium video publishers haven’t had to worry quite so much up until now. For the most part, the scarcity of premium inventory has reduced the pressure to bundle data with video inventory, but that’s set to change as competition intensifies. 

And intensify it will – Facebook aren’t the only company ramping up their video presence. In the last week alone, The Sun launched their Premiership goals (which will feature advertising) and The New York Times announced they’re set to invest far more heavily in video. And pretty much every major publisher and broadcaster has similarly ambitious plans for video.

Facebook’s Well-Equipped to Compete as Video Matures

As the market evolves, there will be two major pressures bearing down on publishers: (1) it seems likely that the additional supply will have a deflationary effect on pricing, at least until TV money catches up, which may cause problems for some publishers when it comes to reinvesting in original content; (2) data will have to become an integral part of pretty much every publisher’s offering.

On both counts, Facebook will be sitting pretty. Reinvestment in content won’t an issue, as Facebook’s content is primarily based around user-generated text, images and embedded video, so Facebook won’t have to pay to acquire, produce or stream video content, giving the company a lower cost base than pretty much anyone else in the market. And on the data front, Facebook will be able to keep pace with the market by slowly introducing ‘new’ more granular targeting along the same lines as what it is doing with display advertising.

But before we get to that point, Facebook will have to persuade their user base to accept video advertising, and brands to run ads alongside potentially brand damaging UGC. If Facebook can clear those two hurdles – and we’ll find out fairly quickly if they can or not – the industry will have hugely formidable new competitor at the table.

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