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Reuters/Carlo Allegri
TV on the internet.

Why your Facebook news feed is getting cluttered full of videos

By Leo Mirani

“Video is a very big priority,” Mark Zuckerberg told investors during the third-quarter earnings call this year. Because that’s where the money is.

Advertising is not a zero sum game. But nor do ad executives and their clients have an ever-expanding pool of money sloshing about waiting for new ad space to buy up. All that money going into digital advertising has to come from somewhere.

Over the past decade, much of it came from radio and print. In 1999, radio and print together commanded 61% of global advertising (ex-China), according to data compiled by Macquarie, an investment bank. By 2014, that has shrunk to 29%. It will contract another 7 percentage points in the next four years. Meanwhile, digital has risen from 2% to nearly 20% this year, and will expand to 29% by 2018. Television has also grown—though its share will remain stable in the coming few years.

But most of the low-hanging fruit has already been plucked from radio and print. The worldwide ad market will expand only slightly above global GDP forecasts, meaning that the two strong sectors—digital and television—will have to fight it out for growth. And the two are going to look increasingly similar.

It’s all about brands

Google owns the performance advertising market. That’s when an ad is paid only if the person who saw it takes an action, such as clicking on a link.

But the big bucks are in display advertising, generally used by brands for a variety of subtler purposes. These include creating awareness of a brand, reaching a wider number of people, influencing how consumers think about a brand, or a mix of the three. This is where television excels—and where Facebook is focusing its efforts. (Quartz previously explained the dynamic between performance and display ads here.)

Over the past year, Facebook has introduced auto-playing video in news feeds, video view counts to encourage greater viewership, and video ads. But video ads without videos people watch for fun appear disruptive. For users to watch video ads on Facebook, they need to be used to watching—and sharing—videos on Facebook. The power of that sharing became apparent this summer, when videos from the viral ice-bucket challenge were seen 10 billion times by 440 million people.

On a normal day, people watch a billion videos a day on Facebook. That’s a fraction of YouTube’s daily viewership, and the content is entirely home-made, but it’s a start. Zuckerberg has indicated that professionally produced videos are not out of the question.

In good company

Facebook is hardly alone in pursuing video. Google already owns YouTube and is pushing it hard, with a high-profile new boss and large advertisements in major world metropolises. Google also hired a director of brand solutions last year. Analysts estimate that YouTube accounts for as much as a fifth of Google’s revenue (Google doesn’t break out the numbers), and it is said to be growing faster than Google’s core search-based revenues.

Macquarie suggests that everyone from Twitter and AOL to Yahoo and Amazon (which recently bought Twitch, a live-streaming service) will jump on the video bandwagon in the next year or two. Instagram is another good candidate for high-value video ads. Analysts also expect Facebook to launch a competitor to YouTube in the near- to medium-term.

Facebook is in a sweet spot, whichever way you slice it. Mobile advertising, which Facebook has figured out, will grow six times as fast as desktop over the next four years. Spending on social, as a proportion of total industry ad spend, will double in the next four years. And video will account for $21 billion in ad spend by 2018, up from $9 billion today.

TV fights back

Television executives aren’t sitting idly by waiting for online firms to eat their lunch. Digital’s premise is simple: Advertise with us and we will show your ad, perfectly tailored, to the precise audience you want to reach. Television is attempting to do the same.

With digital boxes, television executives no longer need to rely on overnight figures from measurement agencies such as Nielsen or BARB. Instead, set-top boxes beam the data directly to their screens. What shows are people watching? Are they switching channels during the ad breaks? Did the 30-year-old male sports fan in an up-and-coming part of Seattle see the ad for a sports drink? (Did he go out and buy it?)

Armed with demographic data and digital boxes, broadcasting companies are working on ways to bring the promise of online advertising to TV by targeting ads. For example, DirecTV in the US offers ads targeted by demographic. Sky, a British satellite broadcaster, goes further: It can deliver nearly 1 million different versions of the same ad, depending on whom it’s being served to.

That’s on the box itself. But TV is online too. Most major television channels in the West are now available online, whether on the web or through apps on mobile. That gives them greater reach, a wider sales pitch to advertisers, and the ability to take on web giants on their own turf. And it’s not just free channels; HBO, for example, is considering selling standalone online subscriptions.

It appears to be working: ”Omnicom [a large ad agency] is now advising clients to shift 10% to 25% of TV ad spending to digital channels,” write analysts at Macquarie. But, crucially, “much of the shift is still coming back to the traditional media companies through their own premium online content.”

Convergence

The routes may differ but the destination is the same: personalised, relevant, measureable, high-value advertising. Video is a format that has worked for decades. For all of the tech industry’s innovation, it has yet to create a better way to deliver brand advertising than through the medium of passive audio-visual consumption. The internet is simply a new place for people to consume it.

Smart TVs capture data and use the internet to download content. Computers and mobile devices allow people to watch videos. The line dividing television and online is blurring before our eyes.