Facebook announced in early January that it was shutting down the ad-server portion of LiveRail, citing little usage of that part of the LiveRail business. Facebook will continue to focus on LiveRail’s automated sales of publishers’ in-app mobile video sales and native display ads.
Terry Kawaja, founder and CEO of strategic advisory firm LUMA Partners, often argues that, contrary to mobile and Web advertising — which are demand-driven markets — when it comes to video advertising, it’s better to be on the supply side, because video inventory is scarce. 2015 brought one answer to this scarcity as “outstream” ad inventory exploded. Publishers that lack video content leveraged their display inventory for video ad campaigns in order to tap higher CPMs.
According to Forrester, more than three-quarters (77%) of advertising agencies and 70% of advertisers believe that outstream ads are becoming more important to their clients. Sixty-nine percent of media and publishing professionals said that outstream video would be more important to their clients in the future.
In our experience, LiveRail’s technology provided the backbone of many outstream ad-unit providers. Many of the third parties trying to grab the outstream opportunity had based their strategy on LiveRail’s ad server. By killing LiveRail’s ad server, Facebook, wittingly or not, undermined a number of outstream companies. That has the effect of drying up the outstream revenue of many publishers who never worked with Facebook or LiveRail directly.
Indeed, the outstream opportunity may be the key to Facebook’s revenue strategy. Although the company divulges little information about specific parts of its business, Facebook’s ad revenues undoubtedly ramped up when it added in-feed video. Facebook could be deriving as much as half of its revenue via outstreaming. In order to ensure even more premium inventory from these units, Facebook needs additional premium content.
User-generated content is always a doubtful proposition for marketers. If you have good display inventory, though, you can more easily build good video inventory for outstream. If you have the GRP data on top, the opportunity is even clearer. Facebook seems to have based its revenue strategy on that concept: premium third-party content monetized through video ads whose CPMs stay high thanks to Facebook’s proprietary data.