As Facebook Takes on YouTube, What’s the Long Term Plan For Ads?

If there was any remaining doubt, Facebook FB +0.06% made it pretty clear last week that it is taking YouTube head-on in the battle to own Web video with its big deal with the National Football League. The league began distributing video content on the social networking site last Tuesday; those clips were proceeded by video ads for Verizon Wireless.

That deal, along with several other recent moves by Facebook in the video arena, have led many in both the Web video creator space and the online ad world to speculate about what Facebook’s long term Web video ad plan will be. Given the growth in online video advertising, the stakes are large.

“Facebook is already a place where you consume content, and now they are dialing up video,” said Ezra Cooperstein, president of Fullscreen, a network of YouTube video producers co-owned by AT&T and The Chernin Group. “This is a year where YouTube is still the dominant platform for emerging talent. It’s going to be challenged [in 2015], and Facebook has to crack [ads]. It could be pretty dangerous for YouTube if Facebook does crack that.”

As for how Facebook plans to crack video ads, company officials insist that the NFL-Verizon deal is just a test, and that “post-roll” video ads (ads that run right after video clips) are not necessarily Facebook’s end-all be-all video ad strategy. At the same time, Facebook executives have said publicly they don’t see room for pre-roll video ads running prior to content in people’s news feeds, citing a need to protect the site’s consumer experience. (Of course, Google once had a very anti-pre-roll stance–also in the name of protecting user experience–but today YouTube is filled with pre-roll.)

So what other ad options does Facebook have as it courts YouTube stars, Web original productions like “Comedian in Cars Getting Coffee” and big media companies like the NFL?

Jesse Redniss, co-founder of the digital media consultancy Brave Ventures, said he’s not sure that “post roll” ads like the Verizon spot will have as much appeal to advertisers, especially in the current climate where proving that ads get seen is of top of mind among advertisers. He believes that Facebook may ultimately focus on working directly with marketers to either integrate brands into content, or producing videos specifically for advertisers, who will then pay to have these branded video clips seen by more Facebook users. That’s not unlike the roll of multichannel networks (MCNs) such as Fullscreen or StyleHaul.

“Facebook is poised to become the next big MCN,” he said.

Jordan Bitterman, chief strategy officer of Mindshare North America, is of a similar mindset. He sees content distributors potentially handling their own ad sales, integrating brand mentions into their videos and then using Facebook to drive viewership. “If you are a purveyor of video you pay like brands and everybody else on Facebook pays to get their content seen. It becomes a distribution cost.”

Ran Harnevo, who was most recently AOL’s head of video, says Facebook has a unique opportunity to shape how Web video advertising works by setting a new–much shorter–video ad standard. “The main advantage of the online video space in the last few years was the fact that it basically had the same ad product the TV industry had.

“But the next evolution of this space has to include a better ad experience,” he added. “Thirty-second ads were created for a different medium and are not a good service for digital consumers. Video pre-rolls would be super-effective if they would last five to seven seconds. If Facebook, with over a billion users under their belt, would stick to that format I have no doubt everyone will play along.”

Another popular theory is that Facebook could spin off a standalone video section–or a mobile app like they’ve done with Facebook Messenger–dedicated to video that would become a full-fledged YouTube competitor. Then perhaps in that environment, Facebook could run pre-roll ads like everybody else.

“I wouldn’t put that past them,” said Mr. Bitterman.

Vik Kathuria, global chief media officer at Razorfish, offered a more radical theory about how Facebook could start making more ad money from video distribution. “The first thing that pops into my mind is Instagram,” he said. “I think the video opportunity for Facebook is with this inherently visual sharing platform.  If they could figure out in-stream ad delivery, they may have a solution that could rival YouTube.”