Just last month, reports surfaced that Facebook (NASDAQ: FB) was preparing to launch mid-roll video ads in a significant step toward monetizing the growing video traffic on its platform. To date, partners didn't have a strong method to monetize any video content since CEO Mark Zuckerberg has a strict policy against pre-roll ads, which play at the beginning of a video.
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In an update on its official blog earlier today, the social network made it official: Mid-roll ads are coming, along with a few other ways for partners to monetize their clips.
Video is the next big thing at Facebook. Image source: Facebook.
Expanding Audience Network video ads
Facebook launched its ad network, Audience Network, back in 2014 as a way to expand its presence and ad inventory to third-party sites. The company has been testing in-stream video ads in Audience Network since last May, but is now rolling out the ad format to all Audience Network publishers that have inventory.
Advertisers will be able to upload their ads ahead of time, which will let Facebook run an auction as well as ensure that it provides a good experience for the viewer.
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Ad Breaks in live video. Image source: Facebook.
Ad Breaks in live video
The company has been pushing live videos pretty aggressively for some time now, and also been testing Ad Breaks in livestreams. The streamer or creator can opt to take an Ad Break during the livestream, which will then trigger an in-stream ad of up to 15 seconds. The streamer then keeps a cut of the ad revenue. Ad Breaks have also been in limited beta testing, and Facebook is now rolling it out more broadly within the U.S.
In order to ensure a good user experience, Facebook has some minimum thresholds for when streamers can trigger an Ad Break. Partners need at least 2,000 followers, have 300 concurrent viewers in the live video, and the first Ad Break can only be started after 4 minutes of livestreaming (subsequent Ad Breaks are allowed every 5 minutes). Ad Breaks can only last up to 20 seconds.
Starting to test mid-roll ads
While the previous two features are now exiting testing for wider deployment, Facebook will now start testing Ad Breaks within on-demand video (i.e., uploaded videos that are not live-streamed). This test will be limited to a "handful of partners in the U.S." for the time being, and the social network will spend the next few months parsing the data and improving the feature.
This is likely the most promising initiative. While Facebook doesn't break down the mix of video consumption between live and on-demand, it's safe to say that on-demand video dominates at this point since live-streaming is much newer relative to all the video content that publishers upload.
With Zuckerberg predicting that video is "a mega trend" comparable to mobile, taking these steps toward increased monetization is critically important.
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Evan Niu, CFA owns shares of Facebook, andhas the following options: long January 2018 $120 calls on Facebook. The Motley Fool owns shares of and recommends Facebook. The Motley Fool has a disclosure policy.