Google's (NASDAQ: GOOG) YouTube may still hold the top position for monthly views, but its newest competition for content creators should have it a bit worried. Facebook (NASDAQ: FB) said it will now share revenue from ads with video creators like Funny or Die, NBA and others. However, the social media giant wasn't clear on who exactly can participate, and its revenue split has some wonky caveats, raising concerns among some publishers.
The ads will run alongside such videos beginning this fall, according to a Re/code story, which called the revenue sharing strategy a "full-on attack against YouTube."
Facebook isn't the first online video site besides YouTube to offer ad revenue sharing; Vessel, a startup founded by former Hulu CEO Jason Kilar (and a 2015 Fierce 15 winner) offers generous ad splits in exchange for temporary exclusive rights to content, for example. But Facebook says it offers one thing that YouTube can't: Its users don't have to hunt for videos, or follow a creator's Facebook page, to get content that will interest them.
The announcement came on the heels of a revelation in a Facebook blog post that the social media site will change how it measures user engagement with videos. Facebook will take into account how its subscribers interact with videos on their feed. And its News Feed is changing to serve videos based on those interactions, with a "Suggested Videos" feed that places videos Facebook thinks a user will prefer higher up.
Ad revenue splits will also vary based on that level of engagement, Re/code reported. While its base revenue split is exactly the same as YouTube's--55 percent to creators, 45 percent to Facebook--the amount creators get may still vary. For example, Re/code noted, if a user were to watch the three top ads in his or her "Suggested Videos" feed but only one advertisement during that session, then the 55 percent would be shared among the creators of the three videos.
It can get even more confusing, though. A Fortune story gave an example of a different split: "Facebook … [determines] 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."
There are no details yet on what Facebook will charge advertisers to place their video ads--just two options are currently available, pay-per-impression and pay-per-view, Re/code said. And it's not clear whether all content creators can participate in the revenue sharing program.
"The questions for marketers will be whether consumers will want to go down a 'suggested video' rabbit hole, exposing themselves to advertising in the process. And some media companies are concerned the economics could be worse than with YouTube because of the way multiple videos will have to share ad revenue," WSJ blog CMO Today's Steven Perlberg wrote.
Suggested Videos will doubtless be in a live test mode for a while, too, as Facebook works out the kinks. And the amount of money it will bring in from its video ads won't reach YouTube levels anytime soon: Google's juggernaut generated $4 billion in revenue from ads last year, The Wall Street Journal notes, while Facebook is projected to bring in about $1.5 billion from video ads next year. But considering how quickly the social media site has gained video viewers--it climbed from 1 billion views last fall to 4 billion in April--there's a good chance it will be stealing ad share, not just eyeballs, from YouTube before long.
Engaging viewers is a win-win for OTT players, but content discovery still suffers 'massive gap'
Verizon snaps up AOL for $4.4B, locking in mobile video, advertising tech
YouTube going on the defensive as competition moves in: report
As YouTube marks tenth anniversary, rivals like Facebook queue up to topple the giant