Facebook (FB - Free Report) continues to bolster video initiatives in a bid to generate further advertisement revenues. This is evident from the company’s latest plans to test advertisements on its Instagram developed video application namely IGTV this spring.
The social media giant intends to sell advertisements on IGTV in an attempt to strengthen its IGTV monetization efforts. Reportedly, Instagram is aggressively pursuing deals with its top video creators for testing ads on IGTV.
With the growing popularity of online video advertisements, increasing video content watching hours and solid adoption of video apps, we believe the latest move is expected to drive Facebook’s advertisement revenues. Notably, advertisement revenues remain the company’s key growth driver.
Notably, advertisement accounted for 98.5% of the company’s total revenues in 2019. Further, strengthening advertisement endeavors are aiding the stock in gaining investors’ confidence.
Consequently, the latest move is likely to aid the company in gaining further traction among investors in the near term.
Coming to the price performance, Facebook has returned 6.1% over a year, against the industry’s decline of 15.9%.
Additionally, the move will help the company in expanding footprint further in the online video market where competition is intensifying with the growing online video advertisement efforts of other players.
GOOGL & Others in Fray
With the IGTV advertisement plans, Facebook ups its ante in the online video advertising battle against peers like Alphabet (GOOGL - Free Report) , Roku (ROKU - Free Report) , Amazon (AMZN - Free Report) and Disney’s Hulu, which are also leaving no stone unturned to capitalize on growing online advertisement spending worldwide.
Per a report from Statista, this particular spending is pegged at $37.9 billion for 2020 and is expected to see a CAGR of 4.3% over a period of 2020 to 2023. Further, it is likely to reach $43.1 billion by 2023.
Notably, Alphabet’s YouTube, which holds the dominant position in the online video market, generated advertising sales worth $15.1 billion in 2019, accounting for 9.4% of the total revenues.
YouTube remains a strong contributor to the company’s growth. Notably, more than thousand creators are currently engaged in the platform, bringing in thousands of subscribers every day.
Meanwhile, Amazon also offers online video advertisement and is increasingly ramping up ad offerings across its ecosystem. The e-commerce giant is constantly investing in ad business in a bid to expand beyond display ads on its e-commerce platform and mobile shopping app.
Its ad-supported video service IMDb TV, and live-streaming video platform Twitch and planned ad-supported channels for Fire TV, to name a few remain noteworthy.
Further, increasing video ad impressions on Roku’s video platform is a major positive.
Facebook’s Growing Ad Endeavors
Facebook intends to cash in on the ever-increasing trend of video viewing on social media platforms. Advertisers prefer video advertisements, as these appear to be the most lucrative medium to attract audience.
As video ads generate more revenues than photo and text-based substitutes, Facebook is trying to incorporate more and more video-oriented content to bring in more ad revenues. The company’s Watch, a dedicated tab for video viewing, is acting as a tailwind.
Notably, the company is gaining on increasing popularity of Stories. This is likely to continue driving its ad revenues in the near term.
Further, its product named Automated Ads for small businesses remains noteworthy. Additionally, the updated Ad Library of the company is driving user momentum.
All these endeavors will continue to strengthen the company’s position in the advertising market.
Currently, Facebook carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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