Facebook's bid to land music-video hub Vevo is about more than bragging rights: it could be just the boost it needs to beat back Google's ascent as leader in online display advertising.
Continue Reading Below
While the talks are at an early stage, the social network appears eager to grab a slice of Vevo's display-ad dollars, a growing category that includes graphical banners and video ads.
Facebook kicked off talks with the music site in January, according to reports, even though Vevo's contract with Google's YouTube doesn't expire until the end of the year. Like YouTube, Facebook is offering to host Vevo's music videos and other content in exchange for a cut of the ad revenue.
Last week, Vevo told its users that they will have to sign in using their Facebook logins starting March 9 -- a sign of closer cooperation between the two sites.
Vevo, owned by Universal Music Group, Sony Music Entertainment and the Abu Dhabi Media Co., pulled in $150 million in ad revenue last year. It is among the largest online video sites on the web and attracted 51 million unique US visitors in January, according to comScore.
Landing a deal with Vevo could prove key for Facebook, which is angling to go public this year in a huge IPO that would value the company at $100 billion. The social network barely edged out Google to become the biggest seller of display ads in 2011, but is projected to lose that title in 2013 as the search giant cranks up its display-ad business.
Facebook is projected to take in $2.58 billion from display advertising this year versus Google's $2.54 billion, according to eMarketer. Next year, however, Google is expected to take the lead with $3.68 billion in revenue -- ahead of Facebook's $3.29 billion That gap is predicted to widen to $1 billion in 2014.
Facebook is courting Vevo, in part by offering to beef up its anti-piracy efforts through better encryption measures, sources said. Google's YouTube has butted heads with the music industry in the past over pirated content and copyright protections.
Vevo's owners began renegotiating its YouTube deal last year, with the ad split as the main bone of contention. Vevo doesn't want to give up 35 percent of its ad dollars to YouTube, which provides most of its traffic.