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POV: Facebook Suggested Videos

Mindshare Digital Point of View:

Background

Last Wednesday, Facebook announced it would be making big changes to its video business. Facebook will be embracing traditional TV formulas and incorporating high quality content based on and old revenue sharing model.

Facebook joined the online video business race back in June 2014 by introducing view counting to its platform. At that time, one of Facebook’s biggest advantages was segmentation, however, audio was restricted in order that the newsfeed remained unaffected – a decision that media agencies accepted. A year later, Facebook is evolving its video model in order to activate sound and deliver a truly immersive video experience.

The remake of a traditional formula

The suggested videos function will be activated only once the user has watched a video from their newsfeed. After they have finished watching, a list of suggestions will appear. Suggested videos are restricted to “high quality videos” from media partners such as Fox Sports or NBA, and the video ad will appear between videos with the audio activated since the user has already watched a video. Facebook anticipates a higher quality of video will gain more affinity and engagement than user generated videos. This model is very similar to TV, where the audience is exposed to TV ads between content breaks. In this case, advertisers could use the same aired TV spot and make only one video campaign, however Facebook is optimized for short form videos meaning that short formats will undoubtedly perform better.

New pricing for a new model

Advertisers have two options, pay for video ads only when they are viewed for at least 10 seconds, or pay for the video just for being placed in the user’s view, regardless if they watch it or not. In addition to time measurement, this new option will have audio activated from the start; previously sound had to be activated by the user. This new option could be more expensive due to a more sophisticated product giving a better experience to the user and more features to the advertiser such as re-marketing and sequential stories. GroupM has played a substantial role in this new model by advising Facebook that they need to give video unique characteristics.

New media partners

Facebook has started to close its first deals with important video producers. NBA, Hearst, Fox Sports, Funny or Die, and Tastemade are the first to have signed a 55% of revenue share agreement, meaning that if the user watched four videos and only one ad, the revenue will be shared between those four video producers. This model is not attractive for small producers, but could be additional revenue for those who are already consolidated. However, Facebook has a very long way to go in affiliating partners in order to make this model profitable.

Summary

Facebook is launching suggested videos, fueled with high quality videos that could certainly cause a stir in the TV industry. Marketers and agencies will look at Facebook video again, and will take advantage of its new capabilities. Facebook should move fast to consolidate its new model and high quality video producers certainly have many new options to monetize its content. Brands, however, will definitely be the most rewarded by this new model.