I love following Facebook (FB) and watching as it continues to evolve and innovate, exploring ways to bring in more advertising dollars for its shareholders. As the company has moved up off the lows of last fall, it is looking to sustain its present price position in the high 20s and move up from there in 2013. Through the first half of this year there are some new advertising channels to increase revenue for the company that I would like to inform investors about.
Facebook to Google; we want some of Your Display-advertising Dollars
While most Facebook business is presently driven by ads using information from user profiles, the company is going after new advertising dollars and wants Google (GOOG) to give up a piece of its display advertising market. The "Facebook Exchange" is a new service by Facebook still in its infancy; only about five months old but already has 1300 customers. If you are unfamiliar with what this is, it is not a new form of advertising but something already done throughout the web. Just like Google's own ad exchange, Facebook will let advertisers buy some of its ad inventory in targeted real-time bidding. This new ad format was revealed in the summer of 2012 and initial results showed that re-targeted ads earn businesses 16 times what they spent. It is projected to generate $460 million in 2013 (7% of its total revenue) as compared to Google's $15 billion market.
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Presently the company is looking to grow the exchange globally, looking to expand into Asia and Latin America. We may see this Exchange grow because in 2012 some of this real-time bidding may have been attributed to discretionary or test budgets to see how the advertisement will work. As companies see results, more advertising budgets may move dollars to the "Facebook Exchange."
Facebook: the Master of Stock Price Manipulation by Event
If there's one company that has the idea of using special events to increase the price of its stock, it's got to be Facebook. Facebook just announced that it wants everybody to come to its "special event" on March 7 of 2013 as it reveals a new look for its "News Feed." Needless to say stock prices shot up with the announcement as it always does when Facebook announces its special events. Do these hopeful investors want to buy the stock because they think Facebook has found the Holy Grail of design that's going to revolutionize a revenue input for the company? I am amazed at how a simple announcement can manipulate the stock without the knowledge of any concrete, factual evidence.
Facebook's Video Additions on Newsfeed
It is no surprise that people find change difficult and when it comes to Facebook, where a lot of people connect with family and friends, it proved to be difficult because they are unfamiliar with new designs. The new design that they brought to the news feed is very important in that it now allows the personalization of information. The "Facebook Exchange" brought in more dollars and now the change in the news feed should also be able to bring in new dollars for the company. One of the opportunities Facebook is exploring is the use of video.
Facebook is leaning toward ads about 15 seconds in length and even though ad agencies are usually reluctant to do anything less than 30 seconds, they may have to learn to change. Personally I find 15 seconds very comfortable as a consumer. When I'm watching videos on the Internet using Crackle.com and a commercial comes up and they are only 15 seconds in length, I find them informative and not intrusive at all, so this seems like a good length of time. Just to point out some concerns, an autoplay function is usually considered intrusive by consumers. Also there will be concern when a video plays that no one is watching, will it count towards the advertiser's costs? For this reason and the fact that some ad agencies are concerned that users and visitors to Facebook could become annoyed with ongoing video advertisements over time, we may find some approaching this form of advertising on Facebook with caution.
I believe we'll see an increased usage in the "Facebook Exchange" through the latter half of 2013 and especially in 2014 as companies find that they are able to make a profit through this advertising channel. I am not so sure about the video advertising on news feed yet. I believe we will be able to watch that play out in 2013 as statistics come in. If advertising dollars pay off through this revenue channel we may see revenue increased significantly here also. It will be a good year to watch what happens on Facebook.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
