January 10, 2017:Facebook to test ‘mid-roll’ ads (and share the revenues)

Publishers and labels have been agitating for Facebook to strike music-licensing deals and help rightsholders make money from native videos on the social network.

Yesterday brought encouraging news on the latter front, with a report by Recode on Facebook’s plans to start running “mid-roll” ads within videos on its platform.

“The social network is going to start testing a new ‘mid-roll’ ad format, which will give video publishers the chance to insert ads into their clips after people have watched them for at least 20 seconds,” claimed the report.

“For now, Facebook will sell the ads and share the revenue with publishers, giving them 55 percent of all sales. That’s the same split offered by YouTube.”

There are several reasons to be cautious here: first, that this is presented as a “test” with no details yet on how narrow the range of publishers allowed to try it will be.

Second, that applying such a format to music videos requires more than just enabling labels to sign up for mid-roll ads: the environment of publishers and collecting societies means licensing agreements must be thrashed out alongside advertising moves.

Still, this is a social network with 1.2bn daily active users and an ads juggernaut that yielded $6.8bn of revenues in the third quarter of 2016 alone – not to mention surging consumption of uploaded and live videos on its platform.

Turning on the monetisation taps for video will offer true competition for YouTube, and a potentially lucrative new stream of revenue for the music industry.

We await the appointment of Facebook’s first global music-licensing boss to see how aggressively the company plans to move to unlock that potential.

Stuart Dredge
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