Figuring out a way to monetize
has been difficult for both Facebook and Twitter. Facebook, however, has finally found a way to insert video ads into its mobile apps, providing a new revenue source for the social network.
Although the ads will certainly bring in revenue, they are solely video-based, meaning that advertisers will only pay when the ads are watched. The video ads will build upon the current mobile app "install ads" that Facebook has been using, which have seen some success so far. Install ads are advertising to install a third-party mobile app; Facebook gets a cut whenever a user clicks the add and installs that app.
Mobile App Ads
Instead of inserting traditional text or image ads into the news feed of a user, Facebook has been trying to come up with original ways to bring in revenue and monetize mobile. So far, Facebook has relied on the mobile install ads for the majority of its revenue, and the inclusion of video ads will likely help the install ads.
It makes sense that Facebook has had success with its app install ads considering that they integrate the App Store into the Facebook app, streamlining the process required for purchasing or downloading a new app.
The biggest issue with the install ads seems to be that they lack a way to target users based on their interests. With all of the and user that Facebook has access to, the social network should be able to utilize it in order to display app ads which apply to the users, instead of showing them at random.
The Video Solution
Without the ability to better target users in order to increase the effectiveness of the install ads, Facebook is now hoping that by including videos with them, more users will be inclined to download the app. Whether or not this will be the case has yet to be seen, however it makes sense that they could work.
The new video ads will not automatically play -- although that type of ad may also be in the works. Instead, the videos will only play if a user clicks on them. At least for the mobile platform, this will likely be more effective than auto-play ads, which could become annoying on small screens.
"Video creative has proven to be an effective way to drive engagement in news feed, and we look forward to helping developers use their video creative to find new app installs," said Facebook software engineer Radu Margarint.
App developers and advertisers will be able to insert the ads, which will highlight the best aspects of the game or application. Other versions of the Facebook video ads were reportedly set to cost as much as $2 million per day; since these ads will not automatically play, they should not cost anywhere near that amount.
Alongside the video ad changes, Facebook will be offering a new payment option for advertisers. The new CPA (cost-per-action) model will reportedly allow advertisers to spend 20 percent less per application install.