META Meta Platforms Inc

By Sahil Patel 

Advertisers are beginning to direct more money toward Facebook Watch, but the video-viewing platform remains far behind YouTube in revenue and audience.

Facebook Inc. built Watch to lure more video advertising with professionally produced shows such as Jada Pinkett Smith's "Red Table Talk" and MTV's reboot of "The Real World." Facebook also lets users upload videos that can appear on Watch and, if approved by the company, make money from ads.

Marketers and agency ad buyers met Watch with cautious optimism when it arrived in August 2017. Facebook had accumulated billions of users, but those users didn't think of Facebook as a place to watch TV-quality video series.

"The verdict is still out on Watch -- I don't consume Facebook that way, " said Jordan Jacobson, head of social at the digital agency iProspect. "But Facebook is still one of the two media partners that is on every single media plan these days, and they have one of the biggest bank accounts in the world, so I wouldn't count them out."

The agency is spending at least several hundred percentage points more on Watch this year, Mr. Jacobson estimated.

A Facebook spokeswoman declined to comment on video ad revenue for Facebook Watch.

Advertisers have warmed up to Watch somewhat as time has passed, buyers said.

One senior media buyer, who oversees more than $350 million in marketer ad spending each year, said he plans to spend at least $1 million this year on ads inside Watch. That's not an enormous sum, but he didn't advertise on Watch at all last year. It will be part of a bigger deal the buyer has signed with Facebook to spend more than $10 million on Facebook video ads in 2019, up 50%, the buyer said.

There are two ways to buy video ads on Facebook: Advertisers can pay to run them in Facebook's News Feed or buy "in-stream" inventory -- commercials that air before and during videos -- which typically means the videos on Watch.

Mike Henry, chief executive of OpenSlate, a tech company that offers brand-safety services for marketers on YouTube and Facebook, said all of the 40 clients using its Facebook-specific product plan to spend at least "six figures, sometimes seven figures" on in-stream Facebook commercials.

"Advertisers that have started spending on Facebook have continued to spend and increase their budgets," Mr. Henry added.

Advertisers edging into Watch aren't driven by comparisons with YouTube: In June, Facebook said Watch had 720 million monthly users globally who spend at least one minute on Watch, up from 400 million in December. By comparison, YouTube said in May that it had 2 billion monthly users, up from 1.9 billion last summer.

Rather, some marketers are comparing Watch favorably to other parts of Facebook.

Mr. Jacobson, the iProspect executive, said the agency's growing Watch spending is partially driven by higher completion rates for its commercials there than for video ads in the News Feed.

Facebook this spring started seeking so-called upfront deals for its in-stream video ads, meaning advertisers could reserve chunks of inventory ahead of time instead of buying on an as-needed basis.

In its pitch deck, Facebook positioned the upfront inventory as completely safe for brands, which have been rattled by occasionally finding their ads elsewhere online running near offensive content. The inventory had a monthly audience of 100 million people over the age of 18, the deck said.

Facebook was seeking commitments of at least $500,000 for upfront deals, one media buyer said.

Two buyers said they have struck upfront deals but haven't committed significant sums -- ranging from "a couple hundred thousand to a couple of millions" of dollars, one said. The other called the amount his agency spent on Watch's upfront a "rounding error."

Even with the inroads, Facebook Watch is a shadow of YouTube, which will generate $18 billion in net revenue this year, according to an estimate from Needham & Co. analyst Laura Martin.

Media buyers said they would like it to become more established -- partly to provide a YouTube alternative.

"Facebook Watch has a lot of potential to apply pressure to the YouTubes of the world," said Phillip Huynh, vice president of national paid social strategy at the agency 360i.

Write to Sahil Patel at sahil.patel@wsj.com

(END) Dow Jones Newswires

July 29, 2019 06:14 ET (10:14 GMT)

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