Facebook’s Video Ads Risk Alienating Users

December 20, 2013 Leave a comment

Facebook’s Video Ads Risk Alienating Users

Marketers Applaud Move, but Untested Advertising Presents Challenge

REED ALBERGOTTI, SUZANNE VRANICA and BEN FRITZ

Updated Dec. 17, 2013 8:12 p.m. ET

Facebook Inc. said it would begin selling video advertisements later this week, a move that may help the social-networking giant capture a share of the annual $66.4 billion TV advertising market. Reed Albergotti reports. Photo: Facebook.

Some advertisers rejoiced Tuesday when Facebook Inc. FB -0.75% introduced long-awaited video advertisements. A bigger question is how users will react.Marketers “have to be sensitive,” said Tony Pace, chief marketing officer for the Subway sandwich chain, which advertises on Facebook. “If someone said [this video ad] is going to run whether consumers want it or not, that would give me pause,” he said.

Facebook said its first video ad, a teaser for the coming sci-fi film “Divergent,” would begin appearing Thursday, marking an effort by the world’s largest social network to grab a slice of the $66 billion annual U.S. TV advertising pie.

The video ads, which the company says are still being tested to a limited number of users, will start playing automatically as users scroll through their news feed, the central real estate in Facebook’s desktop and mobile platforms. They will initially play without sound; users can stop the ad by scrolling past it in the news feed.

Some users are wary. “This may be the proverbial straw that breaks the camel’s back,” said Lee Kirschbrown, a senior citizen in Tampa, Fla., who is irked by existing Facebook ads. Video ads “will only make me madder,” he said.

In a November survey of 735 Facebook users by global marketing consultancy Analytic Partners, 83% of users said they would find video ads “intrusive” and would likely “ignore” them.

Marketers are more enthusiastic. “Video is really powerful,” said Shelby Saville, managing director at Spark, a media-buying unit of Publicis Groupe SA PUB.FR -0.18% . “Using sight, sound and motion is a way to get consumers to have an emotional connection to the brand, if it’s well done,” she added.

Video advertising isn’t available to all advertisers, and Facebook didn’t say when it would expand the offering.

A spokesman declined additional comment.

Many advertisers will be priced out of the market. Facebook is charging around $2 million per day for the ability to reach its 140 million U.S. users aged 18 to 54, according to media buyers. Some media buyers said they found the price surprisingly high.

Facebook began pitching advertisers on video ads about a year ago, giving several advertisers and media buyers a sneak peek last January during the Consumer Electronics Show in Las Vegas. In September, Facebook began quietly testing auto-play videos.

Subway was among the companies that placed ads containing video that users had to start manually. Mr. Pace of Subway said roughly 88 million people saw the ad and “millions” of people clicked on it. “It worked pretty darn well,” he added.

Media buyers said advertisers would be more interested in video ads if Facebook allowed them to better target specific sets of users. Facebook currently allows advertisers to target video ads by gender and age, but not by interests, as it does for traditional ads. “Advertisers always need more data than simply impressions and reach,” said Vik Kathuria, global head of digital investment at Mediacom, a media buying firm owned byWPP WPPGY +0.62% PLC.

“This news further confirms that Facebook has abandoned social marketing in favor of standard push-style ads,” said Forrester Research FORR +1.18% analyst Nate Elliott.

Ad experts say it is no surprise that a movie studio was the first video advertiser, since consumers typically are more interested in movie trailers than ads for more mundane products like soup or toilet paper.

“A movie is perfect for this,” said Jordan Bitterman, chief strategy officer at Mindshare, the media buying agency that brokered the ad deal for Lions Gate Entertainment Corp.LGF +0.42% “Americans love films and when you show a movie trailer there is always going to be a certain part of the audience that really likes it,” he added.

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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