With every business now realizing that the internet can no longer be ignored from a selling perspective, online advertising has become even more crucial and competitive. Businesses are out to drive sales by leveraging on the success of social media platforms like Facebook (FB, Financial), Twitter (TWTR, Financial) and Pinterest, among others.
Businesses can do this through video advertising, content marketing and CPC (cost per click), Alphabet’s (GOOG, Financial) (GOOGL, Financial) market leading paid advertising network, among others. While Alphabet’s Google is pretty much the undisputed market leader in search advertising, Facebook has staked a serious challenge to the company’s video advertising on YouTube.
Alphabet’s YouTube is now being asked the questions to stay ahead of the market as renowned social media companies like Facebook and startup mobile apps like Periscope seek to disrupt the video advertising market.
Facebook’s video advertising campaign appears to be gaining traction after Chief Operating Officer Sheryl Sandberg attributed the company’s 57% first quarter 2016 ad revenue growth to its success in video advertising.
Facebook’s ad revenue is expected to account for 12% of the global digital advertising in 2016, up from 10.7% last year and 8.6% in 2014. In contrast, Google’s market share appears to be squeezing after declining to 33% last year from 35% in 2014. It is expected to fall further, by two percentage points to 31%, in 2016.
Facebook reported annual ad revenue of about $17 billion last year, with the majority of it coming from mobile advertising. The company appears to have conquered the challenge of mobile monetization, but still, it lags by miles when it comes to video advertising versus YouTube. Reports suggest that YouTube locked in over $9 billion in ad revenue last year, which is more than 50% of Facebook’s overall ad revenue.
This means that Facebook has a long way to go before it can begin to challenge YouTube’s dominance in video advertising. The company has inked deals with leading publishers to form a partnership akin to YouTube’s, but the brevity of the list means that YouTube will again continue to lead in the publisher partnership programs.
YouTube is still the preferred choice for many businesses when it comes to video advertising because unlike Facebook, the platform is primarily designed to host videos. Facebook is a social media platform, which means that despite it boasting a massive user base, most people are unlikely to be interested in most of the video ads that they come across (it is a question of why am I on Facebook?). With YouTube, however, the kind of audience you get is more likely to be tuned for a video ad because they visit the platform with video streaming in mind. According to a digital advertising agency, UltraWeb, promoting videos on YouTube is likely to yield more returns to businesses than Facebook because of the platform’s audience.
While Facebook may have experienced a massive increment in video views on its video streaming service, this is only because most of its videos appear on users’ newsfeeds by default. Most people will likely play them, while others adjust their settings to disable the auto-play feature.
Some will argue that what appears on the user’s newsfeed is based on their activity on the web, particularly Facebook. But as a Facebook user myself, I have come across videos and promoted pages on my newsfeed that I know for sure have no interest in. Some actually seem like spam because they are pretty much the opposite of what I would be looking for on the web.
As such, it is ideal to say that a good chunk of the views Facebook receives from its video streaming service are not interest-based. Some people view them because those are the default settings for their news feed, while others do it on impulse.
Conclusion
In summary, Alphabet’s YouTube still is the best platform for video promotion and the fact that most businesses still prefer to use the platform even when using Facebook video ads means that it will be hard to dislodge the service from the top.
Therefore, YouTube will continue to trump rivals to the foreseeable future and its dominance will also be backed by a successful campaign in mobile advertising, which as things stand, Facebook leads with 24% market share.
Disclosure: I have no position in any stock or commodity mentioned in this article.
Start a free 7-day trial of Premium Membership to GuruFocus.
