Facebook Rolls Out Video Ads, Takes Aim at TV Networks

After months of testing, Facebook launched its premium video ad product yesterday. The opportunity for a massive windfall in new revenue helps explain why Facebook was so deliberate in testing the efficiency and reaction to the ads.

Facebook finally launched its video ad product yesterday in its quest to bring more TV ad dollars into the social graph. After numerous delays, Facebook appears confident that the new auto-play video ads won't disrupt users' flow on their news feeds.

Facebook Video

As TV advertising budgets move online, Facebook stands to be a major beneficiary of that shift. That undeniable opportunity for a massive windfall in new revenue helps explain why Facebook was so cautious and deliberate in testing the efficiency and reaction to the ads prior to a wider rollout.

Facebook says its working with a select group of advertisers for now and that users will begin seeing the ads in their news feed on mobile and desktop over the coming months.

Facebook Keeps Ads on Mute

The 15-second video ads will automatically play without sound as they appear on the screen and stop once a user scrolls past them. The ad unit also includes a full-screen view with sound that users can access by clicking on the ad.

Defaulting to a muted auto-play video ad follows the same advertising approach taken by Instagram and Facebook hopes it's enough to not turn off too many users in the process. Facebook officially began testing the premium video ads in December.

[Related: Privacy, Consumer Groups Ask Court to Reject Facebook Ads Settlement]

In a pitch deck that Facebook presented to large advertisers at the time, it highlighted data that showed Facebook reaching a higher percentage of 18 to 24 year olds in the U.S. than each of the four major TV networks. With an average reach of 70 percent during primetime viewing hours, Facebook beats the scale of those networks by at least 9 percent or as much as 15 percent, according to the widely leaked presentation.

Facebook also claims to have a greater reach than TV networks among 25 to 34 year olds by as much as 160 percent during daytime hours and up to 38 percent during primetime.

[Related: Facebook Testing its Ads in Third-party Mobile Apps]

"It's just all about the reach and being able to give them really good insight into who they're reaching," says Seth Shafer, research analyst at SNL Kagan. Facebook's average daily and monthly audience numbers are large enough to get the attention of any advertiser, but the company's ability to also target and segment those audiences is what sets it apart, Shafer adds.

Hey, I Saw That on TV

Indeed, much of Facebook's playbook for video ads follows the same framework that advertisers are already accustomed to on television. It's primarily those TV ad dollars, an industry that approached $70 billion in the U.S. last year and almost $200 billion globally, that Facebook has in its sights.

TV networks are "already eager to place big investments around their fall season," but the film industry has been less enthusiastic, David Lawenda, head of Facebook's global marketing solutions, said last month at the Digital Entertainment World conference.

"Premium video ads are bought and measured in a way that's similar to how advertisers already buy and measure ads on TV," Susan Buckner, product manager at Facebook, writes in a blog post. "The ads are bought based on targeted gross rating points to reach a specific audience over a short period of time. Delivery is measured by an independent third party, Nielsen online campaign ratings (OCR), and advertisers only pay based on what Nielsen OCR measures."

Gross rating point is a metric used by advertisers to measure the size of an audience reached within a certain window of time. Facebook's video ads fall under that practice with deeper targeting capabilities that will enable advertisers to slice and dice the groups of users they reach with any particular campaign.

The auto-play video ads will reportedly cost anywhere from $1 million to $2.5 million per day, but Facebook hasn't confirmed those numbers. Shafer of SNL Kagan isn't making any projections about how much revenue Facebook stands to gain from video ad sales, but believes the company's mobile advertising product is a good benchmark.

Video Could Be Good (Very Good) to Facebook

Over the course of 18 months, Facebook went from zero revenue in mobile to a roughly $1.2 billion per quarter business today. "I can't see any reason that video ads wouldn't do at least that," says Shafer.

[Related: Facebook's news feed gets more commercial with video ads]

Facebook's meticulous approach to its video ad offering will go beyond the initial launch and execution. The company has tapped Ace Metrix to assist in reviewing all ads before they get the green light. "Ace Metrix will allow us to objectively measure the creative quality of the video in the Facebook environment, and highlight performance indicators for advertisers such as watchability, meaningfulness and emotional resonance," Buckner says.

In what she describes as a "limited introduction" with a "smaller number advertisers," Facebook will continue taking steps to ensure that video ads are high quality and delivering the best experience possible.

"They've taken a lot of pains to make it as painless as possible," Shafer adds. While Facebook can barely blink without getting negative reactions from at least some of its 1.2 billion users, there has yet to be any correlation with a drop-off in usage following the introduction of new ad products in the past.

Matt Kapko covers social media for CIO.com. Follow Matt on Twitter @mattkapko. Email him at mkapko@cio.com Follow everything from CIO.com on Twitter @CIOonline and on Facebook.

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