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Understanding Online’s Reach Potential: A Facebook Case Study
According to estimates by the renowned investment bank Morgan Stanley, the video ads that Facebook plans to launch could generate $1 billion in revenue for Facebook in 2014, accounting for 1% of the total U.S. TV advertising budget. By 2019, this figure is projected to reach $5.5 billion. The launch of Facebook's video ads has been postponed from summer to autumn this year. Morgan Stanley's forecast is primarily based on information from Bloomberg and AdAge, rather than direct discussions with advertisers.
Analysts Scott Devitt, Jordan Monahan, and John Egbert believe that the upcoming video ads will increase Facebook's advertising revenue by 12% next year. The reason is that advertisers spend a great deal of money on TV ads and now they are looking to place similar ads on the Web.
According to a Nielsen survey, Facebook significantly enhances or duplicates the reach of TV ads among younger demographics: "Young users are the most desired and hardest group for advertisers to reach at scale. Facebook's consistent reach among people under the age of 30 is particularly appealing to advertisers."
Of course, this logic also implies that advertisers will continue to heavily invest in YouTube's video ads. Morgan Stanley predicts that YouTube's video ad revenue will reach $5.7 billion in 2014 and $16.9 billion by 2019.