Facebook tests out new feature with ad-supported videos
In its latest bid to attract even more video content to its site and compete with YouTube, Facebook is testing a new ad-supported feature that shares revenue with content creators.
The new "Suggested Videos" feature, which is currently being tested on iPhones, includes a revenue-sharing arrangement for media companies and content creators, similar to YouTube's current revenue-sharing model.
In the Suggested Video feed, the user will be offered an additional feed of video suggestions based on the clip they originally clicked on in their News Feed.
Facebook plans to share 55% of the revenue generated from the ads sold alongside the videos with the content creators, Facebook spokeswoman Carolyn Thomas said in an email. A few initial partners to this arrangement include NBA, Hearst, Fox Sports, Tastemade and Funny or Die.
The social media giant has been a threat to YouTube since it first began video advertising, but this new ad-sharing component encroaches even more, said Debra Aho Williamson, principal analyst at eMarketer.
"Up until now, the only way video ads could be seen [on Facebook] was in the middle of the News Feed," Williamson said in a telephone interview. "This new feature now brings Facebook closer to what YouTube does."
Facebook said in a recent blog post that twice as many people watch videos on the site today compared to six months ago. In an effort to keep up with this increased video traffic, Facebook has been busy making changes to its site to keep both advertisers and users satisfied.
The company announced Monday that it is changing its News Feed algorithm to further consider how a user interacts with the video, and prioritize certain videos on their feed accordingly.
Also this week, Facebook sought to make video ads more attractive to marketers by lengthening the amount of time a user views an ad before the marketer is charged for it. With this option, an advertiser is charged after a user views a video ad for 10 seconds or more, significantly longer than the current policy, Facebook spokeswoman Elisabeth Diana in a telephone interview.
"We want to give advertisers a choice in how they buy ads, and a lot of marketers buy this way," Diana said. "We landed on the 10 second option because many marketers said it was a good metric, and the majority of the value is created within 10 seconds."
The majority of Facebook ad revenue now comes from mobile devices. Its main driver of growth in its advertising business has been mobile, according to research from eMarketer. The independent research firm projects that mobile ads will account for 73% — or $10.90 billion — of Facebook's worldwide ad revenue this year. The company's stock set an all-time high last week, pushing its value ahead of Walmart, the world's biggest retailer.
"Compared to Facebook, other mobile apps don't adhere to the same experience that Facebook does and advertisers seem to appreciate that," Williamson said. "The things that Facebook is doing in terms of video targeting and measurements is really valuable to advertisers ... a lot of advertisers now feel the need to be on Facebook."
Follow Trisha Thadani on Twitter: @TrishaThadani