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Big day for Facebook! Past the $38 IPO hurdle and plans to sell video ads at $2.5 million a day

Mark Zuckerberg: 'Sensitive'

Until now the pinnacle of big ad spending has been the Superbowl with 30-second ads for around $2 million a pop; now Facebook it is reported is set to challenge that, charging up to $2.5 million a day for 15-second ads fed into users' news streams.

Facebook's aim, according to Bloomberg, is no less than breaking the long-held dominance of television over advertising budgets. Reporting the initiative, Bloomberg quoted "two people familiar with the matter."

The world’s biggest social network site, with 1.15 billion members, expects to start offering the spots to advertisers later this year, according to the people, who asked not to be named because the plans aren’t public.

It's all happening on a huge day for Facebook - with the social network rising above its $38 initial public offering price of 14 months ago in early trading.

Facebook’s online rival Google, chasing ad dollars that have traditionally gone to TV networks, began funding original content channels on its YouTube video-sharing site. AOL has started HuffPost Live, a CNN-like video stream running five days a week.

With Facebook, the idea would be to capitalise on the millions of users who actively check the site on a daily basis, including prime-time hours coveted by television advertisers.

As of last quarter, 61 percent of Facebook members were using the site daily.

“Every night, 88 million to 100 million people are actively using Facebook during prime-time TV hours in the United States alone,” Chief Operating Officer Sheryl Sandberg said last week on a conference call about second-quarter results.

Elisabeth Diana, a spokeswoman for Facebook, declined to comment on its advertising plan.

Optimism over Facebook’s advertising prospects has helped the stock leap after a more than year of trading below the $38 price of its May 2012 initial public offering. Following a 41 percent gain this year, the stock climbed as much as 1.8 percent today to $38.31.

The social network already allows advertisers to upload videos to their Facebook page and then broadcast them to a user’s news feed. But the new service would let marketers buy their way directly into a person’s feed with a 15-second pitch, according to the people. That’s typically the minimum length of a television commercial.

The commercial is likely to be auto-start and might include the sound. There is certainly potential there for irritating some users, said commentators.

At 15 seconds, the ads also would be the same length as Facebook’s Instagram videos -- a feature that was added to the company’s photo-sharing service last month. That means the commercials would come in a familiar format for users.

The commercials will initially be sold on a full-day basis and can only be targeted to users based on age and gender, according to the people who spoke to Bloomberg.

Facebook members won’t see a commercial more than three times in a given day, the people said. Depending on how large an audience an advertiser plans to reach, the ads will range in price from $1 million to about $2.5 million a day, according to the people.

CEO Mark Zuckerberg has been working with global marketing head Carolyn Everson on the video ad service. He is said to have has pushed back the start date at least twice, to make sure Facebook’s user experience won’t be tainted by the ads, according to the people.

Zuckerberg said last week that he’s sensitive to how users react to advertising in general. He plans to limit the amount of ads people see to about one for every 20 updates. That would comprise about five per cent of a user’s news feed.

“One of the things I watch most closely is the quality of our ads and people’s sentiment around them,” Zuckerberg said. “We haven’t measured a meaningful drop in satisfaction.”

In a separate report released today, Nielsen found Facebook attracts more 18- to 24-year-old people during prime-time viewing hours than any of four major television networks.

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