Facebook’s ‘world building’ AR could be a boon for ads

Just as Facebook’s video ad business begins to approach its first plateau (well hardly a plateau, given that it came out with revenues up 51% this week), artificial intelligence (AI) and augmented reality (AR) are coming together nicely for the company’s next venture in social advertising. Facebook has revealed a slew of new projects it’s been working on that’ll position the social network to take targeted advertising to a whole new level.

AR today is all about the smartphone – take Pokemon Go or Snapchat, for example – and so too is Facebook. The company is hoping to capitalize on a few trends that are beginning to intersect at the smartphone: AR technology, AI computing, and the growing importance of the smartphone’s camera in users’ daily lives.

The company is increasingly focusing its efforts on turning itself into a video-first social network and advertising empire, but Facebook’s strategy has hit a tiny snag: while the social network is working to become a video-first platform, video ad load is close to saturation on Facebook, which is why the company said last quarter that it expects video ad revenue growth to slow significantly in 2017.

During Q4 2016, Facebook’s ad revenue grew 53%, and the majority of that came from mobile. Facebook’s mobile ad revenue jumped up 61% compared to Q4 2015 to reach $7.2 billion. That means mobile accounted for 84% of total ad revenue.
Now, Facebook has been working to inject more smarts into the smartphone camera. At the company’s recent F8 developers conference, Facebook CEO Mark Zuckerberg unveiled a new AR platform that can manipulate photos taken with a smartphone camera.

“The camera needs to be more central than the text box in all of our apps,” Zuckerberg said at the conference. “We’re making the camera the first augmented reality platform.”

Facebook claims its new camera platform and the technology behind it is more futuristic than Snapchat’s face-forming filters, or Google’s ahead-of-the-times Glass eyewear. The development team has reportedly put neural net-powered artificial intelligence software directly onto the smartphones of some 2 billion consumers via its app. That software is able to understand and manipulate images in completely new ways, Zuckerberg said, from creating more intricate and complicated “face masks” – Facebook’s version of Snapchat’s filters – to actually inserting digital objects into real world photographs.

Zuckerberg has some unusual ideas about how his company’s AR will transform the world –Zuckerberg thinks someday in the future, consumers will “stare at blank walls” to enjoy a new digital art gallery, seeing the world only through the lens of their smartphone cameras. But Facebook could very well see its new AR and camera platforms transform its own advertising business.

“We want to be able to look at a photo and understand what’s in it and whether that’s something that you’re going to be interested in,” Zuckerberg said during the company’s Q4 2016 earnings call. “And similarly, we want to be able look at a video and watch it and understand whether that’s something that you’re going to be interested in.” That leaves a lot of room for synergies with advertising.

Facebook has now opened up its AR platform for developers to begin experimenting with its precise location and object recognition technology. That technology could prove to boost engagement for users on the platform, but it could also easily be leveraged for delivering new types of marketing messages and advertising experiences by offering new visuals for consumers, and offering new types of location and targeting parameters for marketers.
As it stands now, a lot of AR marketing and advertising comes from a “just for fun” budget. A recent survey from eMarketer found 17% of ad agencies are using AR experiences to raise brand awareness, and 67% hope to use AR to increase brand engagement. But that could change as consumers and marketers alike become more comfortable with the technology.

And in fact, a handful of brands have already begun experimenting. Nike, for example, has developed an AR app that can track users during a run and relay back to them stats. Facebook is also talking to Hollywood studios to create AR overlays to promote new releases.

Facebook’s AR advertising ambitions puts it in direct competition with Snapchat, but Facebook has a pretty significant ace in its sleeve: the platform’s scale. Advertisers using Facebook’s Audience Network can reach over a billion people per month. And because Facebook is now so, so in love with the smartphone camera, it’ll be accepting vertical ads, which could even give marketers the opportunity to re-purpose Snapchat vertical ads on Facebook and Instagram. In other words, Facebook is very interested in drinking Snapchat’s AR milkshake.

The other area of growth for advertising is Facebook’s growing importance for small and medium businesses (SMBs) to reach customers. Facebook now has over 65 million businesses that use the company’s Pages product, and some 5 million Instagram business accounts.

“More and more of these businesses are becoming advertisers, with over 4 million advertising on Facebook and over 500,000 on Instagram,” said Sheryl Sandberg, Facebook COO. “It’s clear that businesses of all sizes are using our platforms to reach customers.”

Snapchat has already demonstrated how it can transform an ad experience from intrusive to interactive using AR. And with its location-based filter ads, Snapchat has tapped into local business advertising by allowing businesses to create special filters that become available to users when they’re within a specific geographic vicinity. Those branded filters have been heralded by some as the future of marketing.

Facebook’s AR platform, with all its location data, object recognition and AI computing bells and whistles, could push the boundaries of that future by turning interactive marketing campaigns into ephemeral, augmented reality experiences for consumers to engage with and share with friends.