uploads///YouTube Net US Video Ad Revenues

Facebook to Take On YouTube with Its New Video Ad Feature



Discover more videos with Facebook’s new “suggested videos” feature

Facebook (FB) recently introduced a new section on its website called “Suggested Videos.” It’s located in the News Feed. The new feature recommends videos based on the previous videos that users viewed in the News Feed. The videos will autoplay as users scroll over the area.

Article continues below advertisement

Challenge to YouTube’s monopoly in the digital video market

The videos would be interspersed with autoplay advertisements. The idea is to help users discover videos similar to the ones they like. Among the suggested videos, Facebook plans to feature video ads, testing the waters in the video advertising market. The firm wants to challenge Google’s (GOOG) control of the digital video market that YouTube gives it.

According to the above chart, Google remains the undisputed leader in the global online advertising market. According to eMarketer, YouTube generated ~$850 million in revenues from video ads, accounting for more than 20% of the overall video advertising market in the US.

Other players that are picking up the pace in this market are Microsoft (MSFT) and Yahoo! (YHOO). Microsoft recently announced an advertising deal with AOL, as discussed previously in this series.

An incentive for content creators

Video viewing has taken a great leap forward on Facebook, with daily views totaling 4 billion in the space of one year. However, video creators are still struggling to make money.

Facebook plans to monetize the videos and return some of the revenue to video creators. This is a great incentive for content creators, and it gives them the opportunity to create products suited to Facebook. The revenue split will see 55% earned from ads going to the creator and 45% staying with Facebook. The new feature has been tested with partners such as NBA, Fox Sports, and Tastemade.

For diversified exposure to Facebook, you can invest in the Technology Select Sector SPDR Fund (XLK). XLK invests 4% of its holdings in Facebook.


More From Market Realist