Facebook could learn a lot from Spotify when it comes to making money from video
- Facebook is trying to figure out the right video ad model for Watch.
- It's not clear whether consumers will be OK with pre-roll or mid-roll ads.
- A solution may lie in Spotify's video ads, which are upfront with consumers about giving them 30 minutes of music with no ad interruptions after a single ad.
Facebook has painted itself into a corner.
The company wants to be a major video-advertising player, but its executives have declared that they are firmly against pre-roll ads, those video ads that run right before video clips.That's probably a smart position to take for now, at least when it comes to Facebook's news feed - which is where the bulk of Facebook's video consumption occurs. Shoving a must-watch ad into someone's feed before video content they may or may not even be interested in in the first place sure seems like a way to infuriate consumers.
But for the fledgling Facebook Watch, which is designed to be a section of Facebook where people hang out and watch videos because that's what they've set out to do, pre-rolls have to be on the table. And, according to Recode, a test of six-second pre-roll ads is coming to Watch this year.
However, Facebook doesn't seem to love this strategy. It has publicly, and in discussions with media partners, talked up mid-roll ads - those that arrive midway through a video, during content breaks, like TV commercials.
The problem Facebook faces is that the mid-rolls ads currently interrupt mostly very short videos, the kind of people are used to blazing through on their phones, though longer content is in the works.
And the early buzz from consumers and some publishers on mid-rolls hasn't been great. It's very easy for viewers to bail out once these ads start playing - which means they essentially stop watching or leave the site/app altogether.
Spotify offers Facebook a model
But there's another approach.
Instead of emulating YouTube (which again, it seems to be doing with Watch), Facebook could learn a lot from - wait for it - Spotify.
The model here is simple: give users the run of Watch without ads for a pre-set period - as long as they watch one quick ad upfront.
Since 2015, Spotify has offered advertisers what it calls Sponsored Sessions. Basically, when using the free Spotify service, people encounter a video ad preceded by the following message: "The next 30 minutes are ad free, thanks to the following sponsor." Then you watch a Volvo or a Wild Turkey ad, and you're off to streaming whatever music you fancy.
Not only is it a pretty good deal - you get premium content (like, say, Beyonce) and all you have to do is sit through a 15 or 30-second ad that you can pay attention to, or not.
But also, you know what's coming, and that your experience won't get hijacked by a mid-roll at any given moment.
That's because Spotify is upfront about the deal. It's exactly the kind of overt appeal that advertisers and publishers need to take in an era when consumers are skipping and avoiding ads all over the planet, and any interruptions are viewed with hostility.
Transparency with consumers
Plus, the company's core subscription model gave his team cover, since the whole company wasn't relying on ads to pay for everything. Yet the approach has paid off - and most people can see the ads and tend to finish them (neither a given in digital video). Plus, TV advertisers can use their already paid-for TV ads.
"It's very transparent with consumers," he told Business Insider just prior to setting out for the Consumer Electronics Show, where Spotify is planning a major presence in courting attending marketers. "We give them a proposition. And they get a long listening session." And even better, marketers are seen as giving people something they love.Wouldn't this overt tactic make total sense for Facebook Watch? True, Facebook first has to get more humans to know that Watch exists. That's no small matter. But once you get people into the fold, wouldn't it make sense to set their expectations on advertising upfront?
Facebook has been researching the different ways people interact with ads in different environments. They have found that people will tolerate interruptive video ads as long as they aren't too long.
Perhaps. But it's awfully early in establishing the ad mores for Watch. Maybe 30 minutes of ad-free isn't the way to go here. Shorter sessions might be better.
Either way, by spelling out the idea to consumers that you'll be able to watch all the videos you want for a while after checking out such and such an ad could serve to make the whole platform more palatable.
To be sure, not every digital media company can afford restraint when it comes to how many ads they shove down our throats.
"Our business does allow us to be selective," said Benedik.
But if anybody else has the revenue structure to be picky, and the power to set consumer expectations, it's Facebook.