Facebook gaining ground on YouTube in video ads ‘arms race'

Facebook is fast emerging as a more realistic alternative to YouTube for advertisers to spend the bulk of their video advertising budgets, according to a report.

Video views on the social network are tipped to surpass two trillion this year, which is two thirds of YouTube’s forecasted total for the same period, according to Ampere Analysis. A sixth of Facebook video viewers have not watched YouTube in the last month, the survey of over 10,000 European and North American consumers revealed.

The growing popularity of Facebook’s videos is testament to the arrival of its auto-play ads last year and how they have consequently made audiovisual content more commonplace in people's feeds. Indeed, almost 15 per cent of internet users across Western Europe and the USA have watched videos on the social network in the last month, the study found.

The tussle for dominance between the two media powerhouses cannot be settled on reach alone. Facebook and YouTube’s monthly active users are close with 1.4 billion to 1.3 billion respectively and the main barrier to further growth here will be broadband take-up rather than awareness, claimed the researchers. It means advertisers will need to take a more holistic view of each platform’s video offering, going beyond their main propositions of (Facebook) Autoplay and (YouTube) skippable to consider targeting, cost and how people are engaging with the content.

Can Facebook match YouTube’s return per view?

It is a question advertisers are increasingly asking now that Facebook’s video offering is maturing as the platform is used to drive metrics beyond awareness more frequently. The report concluded that Facebook would be able to match YouTube’s return per view, if it can leverage the fact that its video views are served to logged-in users and therefore gives it greater access to richer, more personalised data compared to YouTube.

The only issue here is that Facebook still uses post-roll videos, a much-derided format that has been ditched by other media owners in favour of running related content they can serve more pre-rolls around. To that end, content owners will be loath to extend their strategies from YouTube to Facebook without reassurance that returns per view are comparable in scale – “no-one will want to risk cannibalizing existing revenue streams if current users shift viewing platform,” the report claimed.

Cost

How advertisers are charged for the placements they buy has been another differentiator both video viewers have been at pains to justify. Facebook costs advertisers once their video has been shown in a user’s newsfeed for 3 seconds or more even if the person doesn’t actually click on the post to watch with the sound turned on. Meanwhile, YouTube estimates the average cost per video and how may views a day after asking a brand to reveal the maximum it would pay for a completed view.

Richard Broughton, research director at Ampere Analysis, said Facebook must deliver “comparable returns” if it is to convince content owners it is a viable alternative to YouTube.

“As Facebook moves from testing its advertising models to more actively soliciting content creators to join the platform, it will come under increased pressure to match the opportunities and per view returns generated by other platforms – notably YouTube. Ultimately, despite Facebook’s current reticence around offering pre-rolls, it may have to bite the bullet and add them to its repertoire,” he added.

There are some brands who already believe Facebook is the better place to get its videos seen by more people. Both Heineken and Kia have revealed the social network now rivals YouTube for their video spend with the latter claiming earlier this year that viewer engagement on its Facebook videos is growing faster than its YouTube efforts.

What next?

YouTube is not giving up without a fight. The video service has been shoring up its defences with a flurry of updates including a news offering and the introduction of video-ad shopping functionality. Additionally, the study said that “key content creators have been encouraged to sign exclusive deals to reduce the risk of poaching”.

YouTube will hit $1.99bn in net US ad revenues by 2017, up from $1.55bn in 2015, according to eMarketer. However, as the market becomes flooded with more competitors, YouTube’s revenue growth will slow to 6.2 per cent in 2017, from 39 per cent in 2015.

Broughton said: “The scale of the two players is such that there is likely to be no speedy victory for one side or the other – years of competition are on the horizon. From a consumer perspective, exposure to increased volumes of advertising is almost a certainty, but improved returns for their favourite channels will mean more content to watch.

"Any losers are most likely to be smaller video services or broadcasters caught in the crossfire, unable to keep up. For such companies, the old adage 'if you can’t beat them, join them' may well prove to be the wisest course of action.”

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