Analyst: Facebook Video Ads Could Add $800 Million In Revenue In 3 Years

Divergent / Summit EntertainmentA scene from Divergent, the new movie that's being advertised in Facebook video ads today.

Facebook could see a revenue boost of up to $800 million over the next three years from the new video ads it test-launched today, couple with ads in Instagram which launched earlier this year, according to Sterne Agee analysts Arvind Bhatia and Brett Strauser.

The pair estimate that Facebook's total revenue will rise to as much as $10.2 billion in 2014. Here is their breakdown:

There has been talk that video ads could command $3M+ daily and we estimate video ads could represent as much as 5% to 10% of Facebook's advertising dollars in 2014, depending on how aggressively Facebook rolls them out. Ultimately, video ads will help Facebook more directly go after the $200B+ worldwide TV advertising market. We note that in the U.S. alone roughly 90M to 100M people are using Facebook during prime-time TV hours.

...Ultimately, including video ads, we see advertising revenue potential of $800M+ worldwide over the next three years.

Facebook began a test of autoplay video ads in its News Feed today, with inaugural client Summit Entertainment and its movie Divergent. Here's the trailer for the movie:

Disclosure: The author owns Facebook stock.