Along with Facebook's strong financial results released on
Wednesday was a number that should send a chill through the cable and
broadcasting industry. The social network - whose shares rose 5 percent to hit
a record high of $109.44 on Thursday - said its video views surged to 8 billion
per day in the third quarter, from just 1 billion a year earlier, highlighting
a rising threat to TV ad revenue.
The growth in video views presents the most significant
near-term opportunity for Facebook as the company looks to grab a bigger slice
of the TV advertising market, analysts said. Cable companies in particular face
an increasing threat to revenue as consumers switch to online streaming
services such as Netflix and Hulu - a trend known as "cord-cutting".
The online video ad market is likely to be worth about $17
billion a year by 2017 in the United States alone, Pitz said. Time Warner Inc,
the owner of cable channels TNT, TBS Cartoon Network, said on Wednesday that
ratings for its key U.S. entertainment networks had dropped more than expected,
which will result in a fall in ad revenue next year.
Walt Disney Co owner of cable sports network ESPN, as well
as broadcaster ABC, offered a gloomy outlook for its cable business in August. Atlantic
Equities analyst James Cordwell said that about 50 percent of all media
consumption was now online, but only 17 percent of non-search ad budgets were
spent online.
In a bid to capture TV ad dollars, Facebook has launched
several tools to target brand advertisers, including a way for marketers to
plan, buy and measure Facebook video ads using target rating points (TRPs) - a
metric similar to one used to sell TV ads.
Facebook said in September it had 2.5 million active advertisers, a 25
percent jump from February. The potential viewership is huge.
Facebook - now valued at over $300 billion - said on
Wednesday it now had 1.55 billion monthly active users, up 14 percent from a
year earlier. About 90 percent were mobile users. Daily active users exceeded 1
billion for the first time in the third quarter.
Buoyed by a surge in mobile users and advertising,
Facebook's revenue jumped to $4.50 billion in the third quarter from $3.20
billion a year earlier. Analysts on average had expected revenue of $4.37
billion. Excluding items, the company earned 57 cents per share, beating the
average estimate of 52 cents. At least 23 brokerages raised price targets on
Facebook's stock, to as much as $155. The median price target is $125,
according to Thomson Reuters data.