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The Testing Is Over; Facebook Inc. Debuts Premium Video Ads

By Daniel Sparks - Mar 13, 2014 at 7:31PM

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With the launch of premium video ads, Facebook is officially vying for marketers' TV commercial budgets.

Earlier this week Twitter hired former YouTube executive Baljeet Singh as a product director of its revenue organization. One of his roles, unsurprisingly, is to help push new video ads, according to The Verge. As we wrap up the week, it's now clear that Facebook ( FB -4.27% ) is also getting ready to step up its game in video ads; the social network just announced that its test of "premium" video ads in the News Feed is no longer a test. Now, Facebook is introducing these ads to "a select group of advertisers."

How will Facebook video ads work?
Initially, Facebook was testing a series of videos from the upcoming film, Divergent. Similar to videos shared by other individuals, these premium 15-second video ads start playing without sound as they appear on the News Feed, and stop if you scroll past them. To hear sound from the video, users have to click on the video.

Divergent video advertising campaign. After a user finishes watching a premium advertising campaign video, a carousel featuring additional videos from the marketer will appear. Image source: Facebook's official For Business blog.

In its December press release announcing the testing stage, Facebook justified the potential for premium video ads eloquently.

Compelling sight, sound and motion are often integral components of great marketing campaigns, particularly when brands want to increase awareness and attention over a short period of time. From launching new products to shifting brand sentiment, this video format is ideal for marketers who are looking to make a large-scale impact, and for people who will discover more great content in their News Feeds.

These premium ads shouldn't be confused with Page video ads. Premium video ads' reach are "specifically designed for awareness campaigns that are meant to reach a large number of people to increase interest in a brand, product or content, in a short amount of time." Page post video ads, on the other hand, "can then come into play to sustain the message of this initial campaign over longer time periods, in more targeted ways."

As Facebook slowly rolls out the new ad product, premium video ads are limited to a few deep-pocketed marketers "with high-quality campaigns," so that Facebook can ensure the Facebook experience isn't hampered.

A lucrative market
Facebook's move to mass video ads was inevitable. Not only does it give the company a way to vie for TV marketers' budgets, but it also opens Facebook up even more to the fast-growing and lucrative digital video ad market.

There's no better example of just how much potential there is with online video ads than Google's YouTube. eMarketer estimates that YouTube raked in a whopping $5.6 billion in gross ad revenues for the company in 2013, with the bulk of that figure coming from video ads. Further, YouTube keeps a whopping 35% of these revenues, eMarketer says.

What about growth? eMarketer estimates that YouTube's gross ad revenues in 2013 were up 51% year over year.

While Facebook's year-over-year ad revenue growth in the fourth quarter of 76% is certainly impressive, growth rates like this are not sustainable over the long haul. With digital video advertising growing so robustly, and still in early stages of adoption, opening itself up to premium video ads could aid Facebook's growth story, while also strengthening its value proposition as a prominent advertising platform.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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