Facebook weighs Video Ads effect on consumers

Facebook Inc. has been planning for months to enter the highly profitable market for online video ads. As soon as this fall, Facebook plans to launch a video-ad service that will show members 15-second clips on both smartphones and the Web, according to people with knowledge of the matter. Facebook needs the ads to be sufficiently splashy that they will convince brands to fork over roughly $2 million per day.

Yet since earlier this year, Mr. Zuckerberg and his engineers have wondered over how to make the ads not so distracting and slow that they alienate users, according to current and former employees and advertisers. The videos will appear prominently on members homepage news feeds, the people familiar said.

Advertisers began creating video ads in anticipation of a summer roll-out, but had to find alternative marketing plans for time-sensitive products after delays, people with knowledge of the matter said. Several big brands have committed to buying ads for the launch, according to people familiar with the matter.

One of the main concerns for Mr. Zuckerberg was that the video ads should load as quickly as possible in order not to annoy customers. His engineers have started to develop the needed back-end technology for fast delivery, according to the people close to Facebook. Meanwhile, the company had to build out the technology to give its members a more prominent tool to upload and watch clips, which is expected to debut soon.

Mr. Zuckerberg, “set an especially high bar for the team,” said one former Facebook employee with knowledge of the process. Mr. Zuckerberg has been heavily involved in the development of video ads, approving changes at every turn and pushing his team to repeatedly test with small groups, to understand how the ads impact activity and time spent with Facebook, according to two people close to the company.

Ad executives said Facebook told them that the videos will automatically play without sound. But the user would need to tap an ad, to restart it and enable audio, these executives said. Users will only be exposed to one video advertiser per day, though may see content from this advertiser up to three times a day.

many advertisers are concerned about the high price of the ads themselves, several media buyers said.

According to executives familiar with the ads, Facebook will charge around $2 million per day to let advertisers reach the full Facebook audience of adults aged 18 to 54. As a comparison, a 30-second spot during the last Super Bowl cost advertisers about $3.8 million. The company is also allowing advertisers to pay less money to reach segments of the Facebook audience, such as all males aged 18 to 54.

Facebooks stock has risen 45% reaching above its IPO price after showing in an earnings report it is making money from mobile advertising faster than many investors expected.