Fad or future? Video Advertising’s $28 Billion Question

Online video advertising, especially on Facebook, has taken off dramatically in recent years and it has never been more lucrative. With billions of dollars in spending being pumped in, isn't it time to look closer and see if it's worth it? In light of recent facts about inflating metrics and over-saturation in the market,  Kazu Takiguchi discusses whether there is a future in video advertising.

Video advertising has never been more lucrative, but does that make it worth it? Some see it as a fad, arguing view time is negligible and the data unreliable. Meanwhile, others see it as the future: after all, how can you argue with the numbers! More than 90 percent of business-to-business (B2B) prospects consume video online, 4 billion videos are watched on YouTube every day, and more than 30 percent consumers will purchase a product after viewing a video ad.

In 2018, video will occupy about 25 percent of total advertising expenditure at $27.82 billion. Clearly, it is a lot of cash, but does that translate to a worthwhile marketing investment? Will it continue to increase marketing budgets, or simply show itself to be an advertising fad of the 2010s? Let’s explore:

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How did we get here?

Online video has come a long way since the turn of the century. Starting with video mainstay YouTube in 2005, advertising through the medium of moving images has become a staple of all the major social media players. Google’s acquisition of the video platform led to a major shift in focus to monetization. InVideo ads started to appear in August of 2007 and Partner Programs launched that December. The next year, pre-roll advertising started to play before some content. That same month, the site announced Promoted Videos - an operation similar to Google search ads.

YouTube owned the medium for the first decade of the century, but soon found fierce competition from the up-and-coming social media kings. Video adverts entered the world of Facebook in 2013 and quickly became the platform’s pet project. One year later and they launched Premium Video Ads - a function which automatically began playing video advertising content in News Feeds without sound. Facebook began moving aggressively to show videos to its users and by 2016 reported that those users were watching 100 million hours of video content per day - a lot of content, and a lot of content which could be coupled with advertising.

Also worth considering is Facebook’s integration of video advertising onto Instagram. About 400 million Instagram accounts - businesses and everyday consumers alike - leverage the Stories feature to keep their followers up-to-date. Advertisements within Facebook and Instagram Stories are seeing a lot of engagement, with 68 per cent of respondents saying they watch these some or all of the time. More than half - or 52 per cent - said they post Stories on Facebook and Instagram.

Last, and likely least in consideration for your video ad dollars, is Snapchat. The multimedia messaging app allows advertising within the Stories feature and sponsored users but has the lowest video ad prices of its peers, according to a report by 4C. Snapchat ads in the first quarter of the year cost an average of $2.95 per thousand impressions, compared with $4.20 at Instagram and $5.12 on Facebook's app. Experts believe the company’s public launch and younger age demographic has negatively impacted its advertising rates, and it remains to be seen if the application keeps pace with the industry leaders.

“This is a passing fad”

Despite its considerable slice of the advertising pie, video advertising does have its share of critics. More than that, some view the rise and rise of video advertising to be nothing more than a passing fad. So, given the huge amount of investment that advertisers are pouring into the medium, where could such critics be getting this idea from?

For starters, they point to the oversaturation of the market. Facebook is the most cited example of this as it has continued to push video advertising on the platform. In January, the social media empire updated its News Feed algorithm to prioritize content from friends and family over that from Pages, causing the reach of many businesses to drop. In analyzing more than 43 million Facebook posts, marketing agency Buffer found that engagement simply ain’t what it used to be - and that was especially so for video content. Images have been found to receive the most engagement following Facebook’s algorithm changes. Interestingly enough, Pages then post more during troubled times to try and negate any advertising downfall - contributing to the problem of oversaturation.

Next, critics highlight the inflation of video metrics. This has been a proven issue for Facebook in the past due to their methods of calculating video “views”. The website admitted inflating its average video view figures by only counting views that lasted longer than three seconds - a source of controversy since Facebook automatically plays videos when they show up in user feeds. This calculation tactic inflated the average viewing times by 60 to 80 percent, the social network told an ad-buying agency at the time. The situation ultimately ended in a lawsuit from businesses affected, who claimed the inflation of metrics ran upwards of 150 to 900 percent.

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“This is the industry future”

There are always two sides to every story, and others truly believe video advertising is the future of marketing. This camp simply points to the numbers. They believe that whatever way you look at it, there are a lot of eyeballs and a lot of resulting consumer action.

Videos have prompted a change in online behavior, and people are watching more videos on the internet than ever before. In a report by Promo, six percent of respondents said they watch too many videos every day to count, while 10 percent said they watch 10 to 20 videos daily. Close to a third estimate, they watch 5 to 10 videos daily. In any case, that is a big proportion of viewers - almost half - that are watching videos at a high rate. This offers video advertising the chance to work its magic in front of a big audience: And new data reveals a large number of consumers (64 percent) say watching a marketing video on Facebook has influenced a purchase decision. Furthermore, videos can also assist the visibility of a business. Moovly has proven that Google preferences videos in a big way with businesses 53 times more likely show up first on the search engine if they have a video embedded on their website.

Lastly, video proponents claim the medium simply builds trust between brand and buyer.

Having a video puts a face and personality behind the brand and creates a personal connection with the audience. More than half - 57  of consumers - have said that watching videos gave them more confidence to purchase online. Also, users spend more time watching videos than reading text: six minutes on average compared to 57 seconds on average.

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Somewhere in the middle

The truth is this: it is still too early to tell where the future of video advertising will go. It is clearly gaining popularity on many fronts, but there are inherent issues in the medium. These can be fixed and video has proved to be popular with audiences, but only time will tell if it is a serious advertising contender or a passing fad. There is no doubt as video advertising continues to rake in revenue for social media platforms - with Clinch research showing that Facebook draws 46 percent of all video ads created, and an even larger share from Instagram - that they will continue to foreground the medium to advertisers.

My advice? Invest accordingly in a video - but be mindful of the overall advertising mix. A healthy marketing budget should be spread across mediums and platforms. For those who do use video advertising, create content with a clear objective in mind rather than being blinded by vanity metrics like view numbers and average view time. These metrics do not contribute to the bottom line, and a clear advertising objective will always result in better, more focused content. Regardless of whether video advertising is indeed a fad or the industry future, a good marketing plan should include a balance of formats across channels.