Tuesday, December 17, 2013

Facebook to Launch Video Ads and Test User Loyalty

Facebook Inc. (NYSE: FB) will begin to offer marketers video ads this week, according to The Wall Street Journal. Since most companies pay more for these that they do for static ads, the decision could sharply increase Facebook’s ad revenue, as it has for many of the other largest websites in the world that have sold video ads in ever greater numbers. However, Facebook has to wrestle with the disdain many of its users have for any advertising at all, a disdain that is likely to grow with the new and more intrusive format.

Only two months ago, media reported that Facebook would hold off the launch of video ads because of fears of user reaction. It now looks as if the world’s largest social network cannot overcome the lure of extra ad dollars. But the video ad program may not stay in place if the user reaction is violent and widespread. Facebook would be faced with the embarrassing decision whether to eliminate or cut back the new video initiative or be overwhelmed by a revolt that could grow rapidly, hurting Facebook’s prized relationship with its members.

One of the primary disadvantages of businesses like Facebook and Twitter Inc. (NASDAQ: TWTR) is that the “customers” of these social networks believe that they, and not the companies, control the network and its content because these networks are built on their private pages and messages. Their accounts are, after all, theirs and not the social networks’, based on the fact that they have created the content that makes the social network possible, rather than consuming content from sites like the three major portals.

It is this “consumer creation,” compared to “consumer consumption,” that makes many Facebook members so independent. For some of them, standard websites own their own real estate, and thus should have the right to post what kind of advertising they want to. However, if Facebook does not own its real estate, as far as members are concerned, it cannot intrude on users — unless it wants to come up against the effects of the wide belief that Facebook should not be allowed to post any advertising at all.

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