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Facebook Inc. (FB) May Have Created an Ad Revenue Cash Cow With “Live”

Facebook Inc. (NASDAQ:FB)

Facebook Inc has great plans for its Live video feature which allow people to turn their smartphones into miniature TV stations. Live is becoming a valuable tool for spreading news and the firm hopes it would be a tool to get a foothold in the video ad market. The Live broadcast of the fatal police shooting of Philando Castile and the viral video of the “Chebacca mom” are two of instances that reveal the potential in Live.

Facebook Inc, Netflix Inc are still a buy despite market

A recent survey showed that 50% of respondents have watched at least 10 Live video streams in real time. More so, 7 out of 10 people said that they have watched replay of live videos. Two weeks ago, Facebook introduced some new features that could increase the popularity of Live. Facebook has succeeded in creating buzz for Live and now, it is seeking to monetize the service.

Mid-roll video ads debut inside Facebook Live

Advertising Age reports that Facebook has began tests to run mid-roll video ads for live video streams by some of its publishing partners. The ads will appear about 5 minutes into a Live broadcast and the ad could last for as long as 15 seconds. The firm has been dropping hints about its plan to monetize Live video through ads in the last couple of months. The firm says, “We’re running a small test where a group of publishers have the option to insert a short ad break in their Facebook Live videos.”

The test will provide insight into how ads are likely to interfere with the viewing experience in Live. The test will provide an insight into the efficacy of the mid-roll ads that Facebook adopted versus the pre-roll ads that Google’s YouTube uses. If all goes well, Facebook might have just found a way to break out into the video market and start monetizing the product all in one smooth move.

Money well spent to push Live to limelight

Facebook pays publishers such as Buzzfeed and WSJ to make live streams on the service. The firm also pays web celebs, entertainment celebs, and sportsmen to shoot and stream videos on Live.  “The Rock”, Michael Phelps, and Star Trek actor, George Takei are some of the celebs who shoot Live videos to create buzz for the product.

However, critics have observed that the firm is actually buying the said popularity of Live because it pays celebs to make Live videos. It was reported that the firm has paid out more than $50M to the celebs who are shooting, streaming and promoting videos on Live. The fact remains that there’s little incentive for publishers and celebs to take the time out of their busy schedules to shoot Live videos. Hence, the checks from Facebook provide them with an incentive to make the videos.

From a strategic perspective, Facebook made a smart call in paying celebs to use and promote the service. There’s little chances that everyday Facebook users would have been interested making live broadcasts or that their friends would actually commit to watching those videos. However, people would be much more interested in seeing a live training session of Michael Phelps or The Rock trying to pull some “Fast and Furious” stunt in real live.

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Victor Alagbe is a seasoned business and finance writer with a specialty in writing about how to invest for the long-term in healthcare, pharmacology, energy and tech stocks. His long-term focus is on stocks that provide a nice mix of growth and income. For the short term, he passionately writes about trading stock options for the excitement and leverage that stock options offer.