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Facebook Starts Testing Video Advertisements in News Feed

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Dec. 17 (Bloomberg) -- Facebook Inc. is testing video advertisements that automatically play in users’ news feeds, seeking to catch up with other websites offering short commercials online.

The first promotions are starting to run this week, the company said in a statement today. One of the first clips will be a trailer for the Lions Gate Entertainment Corp. film “Divergent,” video posted on Facebook’s website shows.

The world’s largest social-networking service plans to offer 15-second spots, two people familiar with the plans said in July. While the company already allows advertisers to upload videos to their Facebook page and then broadcast them to a user’s news feed, the new service would let marketers buy their way directly into a person’s feed, according to the people.

“Facebook is focusing on trying to get parity with what other websites offer,” said Nate Elliott, an analyst at Forrester Research Inc. in Cambridge, Massachusetts. “If we’re just talking about 15-second auto-start video ads, YouTube has been offering them for five years now. Yahoo has been offering them for a decade.”

The move follows efforts by Facebook’s rivals to capture ad dollars that have traditionally gone to TV networks. Google Inc. began funding original content channels on its YouTube video-sharing website in recent years, giving it a more curated venue for commercials.

Delayed Start

AOL Inc. operates HuffPost Live, a CNN-like video stream running five days a week. Marketers are expected to spend $3.6 billion on online video ads this year, according to Forrester Research.

“We’ll continue to refine this new way for brands to tell stories on Facebook to ensure the best experience for people and marketers,” Facebook said in the statement.

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.

Chief Executive Officer Mark Zuckerberg pushed back the start date for the video ads at least twice, wanting to make sure Facebook’s user experience won’t be tainted by the ads, according to the people. Zuckerberg wants high-definition video and easy-to-use playback features, the people said.

Facebook’s move also would step up competition with social-networking rival Twitter Inc., which has been courting TV advertisers in its bid to reach $1 billion in sales by 2014. Twitter is known for its in-the-moment conversations.

Adding SportStream

Facebook today also acquired SportStream, a San Francisco-based company that will allow the social network to display real-time sports data -- another way it can compete with Twitter. The acquisition will improve how Facebook can interact with its partners that provide content, the company said in a blog post.

Silicon Valley companies have had difficulty luring away ad dollars from television networks because of a lack of a single measurement system that compares TV audiences directly to Internet audiences. Figures from measurement companies such as ComScore Inc. are difficult to compare against ratings from Nielsen, the dominant firm for measuring TV ratings.

The shares of Facebook have more than doubled this year. They advanced 2 percent to $54.86 at the close in New York.

The Wall Street Journal reported the video-ad tests earlier today, citing unidentified people familiar with the matter.

To contact the reporters on this story: Terje Langeland in Tokyo at tlangeland1@bloomberg.net; Sarah Frier in New York at sfrier1@bloomberg.net

To contact the editors responsible for this story: Frank Longid at flongid@bloomberg.net; Pui-Wing Tam at ptam13@bloomberg.net

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