Video has taken over Facebook, with daily views on the platform growing four-fold to a whopping four billion in just a year. But until now, video creators haven’t had a way to make money on the platform.
That changes today. The company introduced its plan to monetize videos and share the revenue with creators. Facebook's revenue split with creators is the same as YouTube’s: 55% of the money earned from ads goes to the creator and 45% to Facebook. The program begins with “a few dozen” partners, including Tastemade, NBA, Hearst, Funny or Die, and Fox Sports.
“Partners say they’d publish a lot more if they could get benefit of distribution but also make money,” says Dan Rose, vice president of partnerships at Facebook (fb).
Facebook's revenue split is slightly more complicated than YouTube’s “pre-roll” ads that play before videos. That’s because Facebook videos play automatically with the sound off. Auto-play pre-roll ads would annoy users, so the company created a whole new environment to show people videos, and in turn, video ads.
Now, when a Facebook user goes to watch a video on mobile, they are taken to a screen with a black background that automatically suggests more videos to watch afterwards. (It's called, in Facebook's straightforward naming convention, "Suggested Videos.") After a few videos, the user will see a video ad. The ads is not attached to any one piece of content, but rather floats between them like a TV commercial. One key difference is that, unlike Facebook’s autoplay videos, these ads will have the sound on, since users are already watching video with sound.
Facebook will split revenue from ads watched between all videos watched in a single session, determining the payouts by how long the viewer spends with each video. So, if you watched a one-minute video from Funny or Die and a four-minute video from Fox Sports with an ad in between, Funny or Die would get a fifth of 55% of the ad revenue and Fox Sports would get four-fifths of the 55% of revenue.
Facebook has tested the “Suggested Videos” product with a small portion of iOS users over the last few weeks. Today the test goes wider, and it will expand to more users in the coming months. Android and desktop will follow, says Rose. Suggested Videos users “a way to go into a more immersive experience,” he notes.
Facebook hasn’t broken out how much money it makes on video ads that appear in its News Feed. Sheryl Sandberg noted in Facebook's last earnings call that the revenue could be incremental, since advertisers may be buying video ads instead of their normal photo ads, not in addition.
But many industry watchers expect video, and specifically, mobile video, to be a major source of revenue growth engine for Facebook in the next year. Despite a recent deal to host two new HBO shows, Facebook maintains it is focused on short form videos and not long-form TV shows and movies. A prior deal in 2011 with Warner Brothers to host movies including the Dark Knight fizzled.) “Facebook is used as a product [in] short, bite-sized sessions—people dipping in and out, multiple times a day, and for brief periods of time," Rose says. Suggested Videos and News Feed are optimized for short-form video, he added.
Prior to today, Facebook’s sales pitch to video creators has simply been: “access our massive audience.” In other words, give us your premium content for free, and get more fans. Even without a financial incentive, Facebook has lured premium video creators to the platform, including Michelle Phan, Complex, Mic and TYT Network, all of which experienced huge audience growth by posting videos to the platform. (It helps that the social network’s “News Feed” algorithm favors video posts and numerous video creators.)
Despite its early success, Facebook faces challenges on its road to video dominance. For one, YouTube, which has been the only video platform with scale for a decade until Facebook came around, will not give up easily. The platform has been fighting to keep its prized creators on YouTube, offering bonuses for anyone signing an exclusive contract. And YouTube is not the only player competing for premium video content. The overflowing bucket of TV ad dollars is too great a prize for any web platform to pass up. As I wrote earlier this month:
Messaging app Snapchat, a Facebook rival, is ramping up sales of video ads for its new Discover platform. Same goes for Twitter, which owns two hot video properties, Vine and Periscope. Spotify recently added video-streaming capabilities to its music-streaming app, partnering with just about every big name in digital-video content. Hulu, Yahoo YHOO 1.29% , and Verizon-backed AOL AOL 0.00% are doubling down on their video strategies. By this time next year, any one of them might have conjured up a 4-billion-view-a-day video product themselves.
Further, Facebook must rush to roll out the sophisticated analytics and copyright tools that publishers are used to. Too often, a random person can upload someone else’s video. Take a recent clip from the Daily Show about the Charleston shootings. A performing artist called Rock-Solid uploaded it to his page and got 23 million views. The Daily Show’s own version, posted hours later, has less than 2 million views.
Executives from the latter two companies provided quotes expressing how “excited” they were about video on Facebook. Only Facebook will sell video ads during the test, unlike with Facebook’s Instant Article program for text publishers, which allows content owners the option to sell ads.