The question of how Facebook will try to rival YouTube's video ad business may have been answered on Tuesday.
While Facebook has been running autoplay video ads in people's news feeds for over a year and has been courting media companies and digital video stars to upload their videos to the social network, the company hasn't offered a way for advertisers to piggyback those creators' videos and for those creators' to make money from the videos they post to Facebook. Now it has.
On Wednesday Facebook announced it is testing showing people who check Facebook on their iPhones a list of related videos when they click to watch certain videos. Those suggested videos feeds will include video ads, and Facebook will split the money from those ad views with certain creators and media companies.
"We're running a new suggested videos test, which helps people discover more videos similar to the ones they enjoy. Within suggested videos, we will be running a monetization test where we will show feed-style video ads and share revenue with a group of media companies and video creators," a Facebook spokeswoman said in a statement. The NBA, Fox Sports, Funny or Die, Tastemade and Hearst are among the first media companies to join the program, according to Variety.
Facebook's approach to ad-supported video is different from most digital video distribution services like YouTube. Instead it's adopting a strategy closer to one that Twitter is also considering as it weighs a new related-videos format, as Ad Age has previously reported.
Facebook isn't putting ads in front of the videos people have opted to watch. Instead when people click on certain videos that pop up in their news feeds, an overlay will appear that will play that video and feature a list of suggested videos underneath that Facebook's content-sorting algorithm has determined is related to the original video. These suggested video lists will include video ads, which is how Facebook and creators will be able to make money.
People will be able to scroll down past the video they initially chose to watch, and these related videos will start playing automatically as they appear. If one of those videos that starts playing is an ad, then Facebook will make money from that advertiser and share that money with any of the creators whose videos a person watched in addition to the ad within the suggested video list, according to Re/code.
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As a hypothetical example, let's say you click on an NBA video in your Facebook feed. That video will start playing in the new suggested video overlay. As it's playing, you'll be able to scroll down and might see a basketball-related video from Fox Sports and a video ad from Nike. If you watch both the NBA's and Fox Sports' videos plus the ad, then Facebook will split the revenue from that ad view with both the NBA and Fox Sports.
However, neither Facebook nor the creators are making money from suggested videos yet. But if and when Facebook decides to make suggested videos an official feature, the company and creators will split the associated ad revenue, with 45% of the money going to Facebook and 55% going to the creators. That's the same revenue split that YouTube typically offers creators, but Facebook is calculating the revenue a bit differently.
According to Variety, Facebook will factor in how much time people spent watching a video when determining how much money to share with creators. It's unclear whether that means people have to watch the full ad or a creator's full video or both for a creator to make maximum money.