Why Facebook Thinks It Can Sell Ads for $2.5M

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July 30 (Bloomberg) -- Facebook, seeking to break the long-held dominance of television over advertising budgets, plans to sell TV-style commercials on its site for as much as $2.5 million a day, two people familiar with the matter said. Bloomberg's Edmund Lee reports on Bloomberg Television's "Bloomberg West." (Source: Bloomberg)

We have to talk about the price.

$2.5 million.

How does that compare to the competition and is it fair?

It sounds like super bowl prices, but they are selling them through the day.

These ads are hitting a lot of people through the entire day, so it's not just 30 seconds here or 30 seconds there, the way you would get on a super bowl ad.

It's going to hit tons of people and that's why the price is so high and chances are you might reach more people throughout the day that even the super bowl buzz.

Give us a comparison to some other outlets.

How much does an ad for a traditional tv network cost or youtube?

The super bowl sets the standard.

A 32nd spots gets $2 million.

Most commercial spots are less than that.

Depending on what audience you are trying to reach.

With facebook, it is an experiment.

They are pricing it high to make sure they don't undervalue the product.

At the same time, it looks like they are going to hit more people than you would for a super bowl ad also might even be a bargain price if you think of it that way.

How does facebook go about selling this?

The important thing sure member is facebook is trying to edge into tv budgets.

When an advertiser spends money, they spend the plurality on elevation, 40% or more.

Maybe 25% on the internet.

When you compare data apples to apples, since facebook is getting nielsen to measure this the same way they measure tv programs, a media buyer can say i can more accurately compare the value of a tv audience to the facebook audience and i can shift my budget from tv buys to facebook buys area -- facebook buys.

Once they do that, they can push the ads right into the newsfeeds.

People won't see the ads more than three times in a given day.

They want to make sure they are not making it too intrusive for users.

What about users?

How are users going to react to this?

Anytime facebook makes any change, they don't like it.

They don't want more ads or whatever features they make changes to.

But mark zuckerberg has said he wants to keep the experience good and doesn't want to put it in too many ads.

Right now about one in 20 newsfeeds up eight is an ad.

Going forward, it might be a 15 second commercial spot.

Most likely, it will be up to the user to see if they want to play it or possibly share it depending on how much they like it or not.

This text has been automatically generated. It may not be 100% accurate.

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