Facebook Plans to Push More Videos and Share Ad Revenue

Videos on Facebook garner 4 billion views a day — 75 percent on smartphones — and the company is increasing its efforts to turn views into profits. Its newly unveiled strategy is to share ad revenue with video creators, both to attract better content and more ads. Facebook will keep 45 percent of the revenue, similar to YouTube’s revenue model, but the two differ in a significant way: Facebook will divide the creators’ 55 percent share of ad revenue among all the videos that appear adjacent to the ad, based on how long users watch each video.

facebook33As a result, video creators for Facebook stand to make less than their YouTube counterparts.

The new Facebook feature, Suggested Videos, will include ads between content; when a mobile user views a video in his News Feed, Facebook will direct the viewer to other, potentially interesting videos.

Facebook has already partnered with several media companies, including the National Basketball Association, Hearst Corp., Fox Sports, Funny or Die and Tastemade.

So far, marketers like what they see — and hear. Sound for ads is now a default setting, whereas in the past it has been muted. That’s “wasted money,” says Kraft Foods VP of media, data and customer-relationship management Bob Rupczynski.

Marketers also like the idea that their ads can be aligned with high-quality content found on TV. But Facebook still has to overcome skepticism and address issues such as copyright and piracy issues. To entice advertisers, Facebook won’t charge them during the first few months, as Suggested Videos rolls out.

RBC Capital Markets analyst Mark Mahaney told The Wall Street Journal he estimates that Facebook stands to generate $1.5 billion in revenue from the video ads next year. In contrast, he adds, YouTube, which shows a similar number of videos, generated about $4 billion in revenue in 2014.

In other words, although Facebook may indeed be a competitor with Google’s YouTube, it still has a ways to catch up.