Analyst Prediction: Facebook Video Ads Will Generate $1 Billion in 2014

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By Kurt Wagner2013-08-08 20:50:51 UTC

Facebook users may not be excited to see video ads hit their News Feeds, but company stockholders should be. A report released by Morgan Stanley on Wednesday predicts that Facebook's video advertisements will generate more than $1 billion in 2014 — a lofty total considering they don't exist yet.

This total would constitute 1% of all television ad spending in the United States. Morgan Stanley predicts Facebook's video ads could generate as much as $6.5 billion by 2020.

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The report, which was compiled by analysts Scott Devitt, Jordan Monahan and John Egbert, is based primarily on media reports from sources like Bloomberg and The Financial Times. It predicts that Facebook video ads will first roll out later this year (a view widely held among reporters covering Facebook) and remain a U.S.-only feature through much of 2014.

Europe is expected to join in late 2014, Asia in 2015 and the rest of the world's markets by the end of 2016.

"Reports suggest that the ad unit will auto-play without sound; when a user switches on the sound, the video will play from the beginning," the study reads. "If a user is not interested in watching the video, he/she simply scrolls past it. Ads will be limited to 15 seconds, with asking prices in the 'low $20s' on a CPM basis, according to agency sources."

Facebook is already showing signs of incredible growth in terms of ad revenue. The company reported $1.6 billion in total ad revenue in Q2 alone, a 61% increase over the same period last year. Since Facebook's Q2 earnings announcement in late July, Facebook shares have climbed over 45%.

Facebook won't be the only social media company to benefit from an influx in video ads. According to the research, YouTube video ads are expected to generate over $4 billion in 2013 and close to $20 billion by 2020, a total that would comprise 17% of the country's total television ad spending.

Will Facebook video ads negatively impact your user experience? Share your thoughts in the comments below.

Image: David Paul Morris/Bloomberg via Getty Images

Topics: Advertising, Facebook, Morgan Stanley, news feed, Social Media, video ads, YouTube