Facebook to start video advertising

Facebook yesterday said it soon planned to start video advertising within members' News Feeds, a move aimed at massive spending budgets for television ads.

According to the social-networking giant, in a "short amount of time" marketers would be able to tap into video ads. The social network is testing out an ad for the film Divergent with a small number of people this week.

Shares of Facebook, were up to a new all-time high, rising 1.6 per cent to $54.67 in morning trading action following the news.

The company's video advertising comes in the backdrop of Google's increased efforts to attract billions of dollars to its massive video-sharing audience at YouTube.

Forrester analyst Nate Elliott said now Facebook would rival YouTube as a source of online video ad reach.

The social network, however, faced a difficult task of drawing the line between outraging its users with abrasive ads and pleasing Wall Street.

Underscoring the distinction, USA Today quoted Facebook member Jason Damata said, while he hated auto-play video ads and would be compelled to not use the site, it would make me want to "buy FB stock because the money this will generate could be considerable and may help them formulate a viable alternative or supplement to TV ad dollars."

According to Facebook, the idea was still in the testing phase and it was not currently selling video ads. The company would not disclose pricing, though, it said the goal for the test feature was to make it a premium advertising product that could be used to reach large audiences at specific times.

Facebook shares that had posted substantial gains over the past four months, were up at an all-time high of $55.18 on the news, before closing up $1.05, or 2 per cent, at $54.86 yesterday.

Facebook had been able to leverage advertising for rapid growth in recent years, with revenue growing from $3.71 billion in 2011 to $5.09 billion in 2012, and to $5.29 billion in the first nine months of this year.

The video ads start playing automatically without sound when they appear and users could click on a video to view it with sound, or scroll past it if they were not interested.

Facebook pointed out that for mobile users the advertisements were preloaded only when a device was connected to wireless internet and would not consume additional data, and no  sound would play unless a user clicked or tapped on the video.