Facebook has announced several major updates related to video, including a few product tweaks to the video experience in the News Feed, and confirmation that it will roll out a dedicated video app for TV:
- Sound-on by default. Sound will fade in and out of auto-playing videos as a user scrolls through the News Feed. It will not play if a phone is set to silent, and users can revert to muting videos automatically in Settings. That videos previously auto-played with sound off was one of the major criticisms leveled at Facebook from advertisers and rival social platforms.
- Larger vertical video. The size of video previews in the News Feed is now much larger. A single video takes up most of the screen, keeping other News Feed items out of sight. Previews can be easily toggled to active full-screen mode. Emphasizing video in the feed will drive up user engagement with such content, while improving Facebook’s ability to generate video ad revenue.
- Minimized video screens. Users can also minimize a video while it's playing so that it occupies a smaller portion of the screen, enabling them to scroll through their feed. Android users can even exit the Facebook app and keep the video playing. This will drive up engagement with Facebook video, particularly in terms of watch time, which should impress advertisers.
- A video app for TV. Facebook will soon roll out a video app for connected TVs, beginning with Apple TV, Amazon Fire TV, and Samsung Smart TV. This will help redefine Facebook usage as fit for TV, and nudge users to watch more videos on the platform. This announcement confirmed a report from a few weeks ago in the Wall Street Journal.
There are multiple dimensions to Facebook’s decision to introduce these new features:
- Gaining some TV ad dollars. US TV ad revenue landed at an estimated $72 billion in 2016, up 3.5% from the $68.9 billion generated in 2015, according to PwC estimates cited by Deloitte. Having a TV app puts Facebook in a stronger position to capture a fraction of this revenue.
- Drawing ad dollars from TV. At the same time, the updated mobile video experience enhances Facebook’s chances of siphoning ad spend that’s shifting from TV to digital. Mobile advertising will grow nearly 3x from $66 billion in 2016 to $196 billion in 2020, according to IDC.
- Being where competitors are. The TV app will be based on Facebook’s new Video tab — a place designed purely for watching videos, much like YouTube. This app will bring Facebook in closer competition with over-the-top (OTT) video services like YouTube, Netflix, and others.
- Precipitating the future of TV. Meanwhile, OTT platforms and connected TVs are causing a surge in TV apps as traditional TV channels lose their luster. Facebook’s TV app puts the company in more of a winning position in a future where TV apps become the new TV channels.
- Bracing for aging populations. Despite claims of secular declines in time spent with traditional television, TV viewing in Q2 2016 was actually up 5% year-over-year (YoY) for those over age 65. This age group is also the fastest-growing segment of the US population, according to Deloitte.
However, there's evidence that TV apps suffer from poor user engagement. Analytics firm Adjust found that just 9% of users return to Apple TV apps seven days after download. In addition, the retention rate for Apple TV worsens after a month, dropping to just 4% of users. Nearly 20% of iPad users and 18.5% of iPhone users return to an app within seven days.
This new video experience could facilitate the prevalence of native ads, or ads that take on the look and feel of the content surrounding them. And these are taking over digital advertising.
By 2021, native display ad revenue in the US, which includes native in-feed ads on publisher properties and social platforms, will make up 74% of total US display ad revenue, up from a 56% share in 2016, according to new BI Intelligence estimates based off historical data from the Interactive Advertising Bureau (IAB) and PwC, as well as IHS.
The rapid uptick in native's share of display ad revenue can largely be attributed to the dominance of social platforms like Facebook and Twitter — which were early champions of native and rely almost entirely on native formats — as well as the introduction of new programmatic technologies that are making it easier for publishers and advertisers to scale native campaigns.
BI Intelligence, Business Insider's premium research service, has compiled a detailed report on native advertising that breaks out native ads into three categories: social native, native-style display, and sponsored content (also referred to as premium native). It provides forecasts for how revenues from these formats will grow over the next five years and looks at what factors, in particular, are driving up spending on each of these ad units. As a note, because revenues from these three types of native content can overlap, it does not provide an overall native forecast. Finally, it lays out some of the challenges that face properties that rely on native ads, namely ad frequency and scalability issues.
Here are some key takeaways from the report:
- Native-display ads, including social native and native ads in-feed on publisher websites, will make up the bulk of native ad revenue from 2016-2021. Native display ad revenue in the US will rise at a five-year compound annual growth rate (CAGR) of 17% during this time period to eclipse $36 billion. The rise of native video ads, particularly on social platforms, will be one of the main drivers of this growth.
- Social platforms generate most of their revenue from native ads and will continue to dominate overall native ad spending through 2021. The dominance of social platforms like Facebook, Instagram, Twitter, and Snapchat on mobile devices, where the entire experience is within a feed, will help propel social's contribution to overall native ad revenue through 2021.
- Sponsored content, which is categorized separately from native-display due to the direct relationship between publishers and brands in creating the format, will be the fastest-growing native format over the next five years. However, the high cost to produce these ads and the limitation in inventory will limit the format.
In full, the report:
- Forecasts US native ad revenue growth from 2016-2021 through three separate forecasts: native-style display, social, and sponsored content.
- Identifies the major drivers of native ad revenue growth.
- Discusses key players within each category that are contributing to the rise of native.
- Presents some of the challenges of wide-spread native adoption with BuzzFeed as a prime example.
- Lays out future opportunities for native ads, including virtual reality, messaging apps, and TV.
To get your copy of this invaluable guide, choose one of these options:
- Subscribe to an ALL-ACCESS Membership with BI Intelligence and gain immediate access to this report AND over 100 other expertly researched deep-dive reports, subscriptions to all of our daily newsletters, and much more. >> START A MEMBERSHIP
- Purchase the report and download it immediately from our research store. >> BUY THE REPORT
The choice is yours. But however you decide to acquire this report, you’ve given yourself a powerful advantage in your understanding of native advertising.
More From Business Insider