For the first time ever, Facebook has decided that it will share as much as 55 percent of ad revenue to video creators whose content will have some video ads attached to it. While this seems like a move to encourage more video makers to upload to the social networking site instead of, say, YouTube, the arrangement isn’t as clear cut as it seems. In particular, Facebook’s revenue sharing setup might actually be less favorable to the advertisers that will be the source of that monetary incentive.
The way video ads on Facebook, currently still in testing on iPhones, works is like this. When viewing a video in a news feed, suggested video ads will be displayed below it. Those ads will autoplay as users scroll. 55 percent of the revenue from those ads will go to the actual video the user wanted to view anyway. Sounds straightforward enough, until the fine details emerge.
Apparently, Facebook will be basing ad revenue sharing on how long the video ad was played. In practice, advertisers have two options. Either they start paying as soon as the video plays, which is the default, or they can opt to only start paying if the video has been playing for at least 10 seconds. In addition, the video ads only start to autoplay when half of the video is already visible on screen. What this amounts to is a setup that might be less favorable to advertisers.
The problem is Facebook’s focus on time-based criteria, which some analysts are considering to be antiquated. In contrast, YouTube’s policy favors advertisers a bit more. Advertisers need only pay if the video ad has been watched for at least 30 seconds or in full, which ever ends first. Factor in the fact that YouTube allows users to immediately skip ads after just 5 seconds or so and you’ve got something that’s more of a win for advertisers.
Facebook’s new business move is clearly an attempt to poach more users from YouTube, but now it has to do the very delicate dance of balancing the interests of those users versus those of advertisers, who will be the source of the cash in the first place. If it isn’t careful, Facebook might find itself with hoards of video makers but with less advertisers to keep the money flowing.