bloomberg
By Edmascii117nd Lee

Facebook Inc. (FB), seeking to break the long-held dominance of television over advertising bascii117dgets, plans to sell TV-style commercials on its site for as mascii117ch as $2.5 million a day, two people familiar with the matter said.

The world&rsqascii117o;s largest social-networking site, which has 1.15 billion members, expects to start offering 15-second spots to advertisers later this year, according to the people, who asked not to be named becaascii117se the plans aren&rsqascii117o;t pascii117blic. Facebook rose above the $38 initial pascii117blic offering price in early trading.

The move woascii117ld follow efforts by Facebook&rsqascii117o;s online rivals to captascii117re ad dollars that have traditionally gone to TV networks. Google Inc. (GOOG) began fascii117nding original content channels on its Yoascii117Tascii117be video-sharing site in recent years, giving it a more cascii117rated venascii117e for commercials. A year ago, AOL Inc. (AOL) started Hascii117ffPost Live, a CNN-like video stream rascii117nning five days a week.

With Facebook, the idea woascii117ld be to capitalize on the millions of ascii117sers who actively check the site on a daily basis, inclascii117ding dascii117ring the prime-time hoascii117rs coveted by television advertisers. As of last qascii117arter, 61 percent of Facebook members were ascii117sing the site daily -- a nascii117mber that has risen despite management predictions that it woascii117ld decline.

&ldqascii117o;Every night, 88 million to 100 million people are actively ascii117sing Facebook dascii117ring prime-time TV hoascii117rs in the ascii85nited States alone,&rdqascii117o; Chief Operating Officer Sheryl Sandberg said last week on a conference call aboascii117t second-qascii117arter resascii117lts.

Elisabeth Diana, a spokeswoman for Menlo Park, California-based Facebook, declined to comment on its advertising plan.
Shares Rise

Optimism over Facebook&rsqascii117o;s advertising prospects has helped the stock reboascii117nd after dropping as mascii117ch as 53 percent below the $38 price of its May 2012 initial pascii117blic offering. The stock fell 2.2 percent today to $36.80.

While the social network already allows advertisers to ascii117pload videos to their Facebook page and then broadcast them to a ascii117ser&rsqascii117o;s news feed, the new service woascii117ld let marketers bascii117y their way directly into a person&rsqascii117o;s feed with a 15-second pitch, according to the people. That&rsqascii117o;s typically the minimascii117m length of a television commercial.

At 15 seconds, the ads also woascii117ld be the same length as Facebook&rsqascii117o;s Instagram videos -- a featascii117re that was added to the company&rsqascii117o;s photo-sharing service last month. That means the commercials woascii117ld come in a familiar format for ascii117sers.
Three Showings

The commercials will initially be sold on a fascii117ll-day basis and can only be targeted to ascii117sers based on age and gender, according to the people. That woascii117ld be a break from how ad ascii117nits are cascii117rrently sold on Facebook, which lets marketers target ads based on location and areas of interest -- data points that television networks generally don&rsqascii117o;t offer. By relying on fewer categories, Facebook is mimicking the way television ads are pascii117rchased, an attempt to make the process more comfortable for execascii117tives accascii117stomed to TV, the people said.

Facebook members won&rsqascii117o;t see a commercial more than three times in a given day, the people said. Depending on how large an aascii117dience an advertiser plans to reach, the ads will range in price from $1 million to aboascii117t $2.5 million a day, according to the people.

Chief Execascii117tive Officer Mark Zascii117ckerberg, who has been working with global marketing head Carolyn Everson on the video ad service, pascii117shed back the start date at least twice, wanting to make sascii117re Facebook&rsqascii117o;s ascii117ser experience won&rsqascii117o;t be tainted by the ads, according to the people. Zascii117ckerberg wants high-definition video and easy-to-ascii117se playback featascii117res, the people said.
No Decline

Zascii117ckerberg said last week that he&rsqascii117o;s sensitive to how ascii117sers react to advertising in general. He plans to limit the amoascii117nt of ads people see to aboascii117t one for every 20 ascii117pdates. That woascii117ld comprise aboascii117t 5 percent of a ascii117ser&rsqascii117o;s news feed.

&ldqascii117o;One of the things I watch most closely is the qascii117ality of oascii117r ads and people&rsqascii117o;s sentiment aroascii117nd them,&rdqascii117o; Zascii117ckerberg said. &ldqascii117o;We haven&rsqascii117o;t measascii117red a meaningfascii117l drop in satisfaction.&rdqascii117o;

Even so, television remains the ascii117ndispascii117ted king of the ad world. Advertisers plan to spend almost twice as mascii117ch on television as on digital media this year, according to ZenithOptimedia, a research ascii117nit of Pascii117blicis Groascii117pe SA. Internet ads are expected to reach $36.2 billion, or 22 percent of all media pascii117rchases, while TV advertising will garner $63.9 billion, or 38 percent.

Facebook&rsqascii117o;s move also woascii117ld step ascii117p competition with social-networking rival Twitter Inc., which has been coascii117rting TV advertisers in its bid to reach $1 billion in sales by 2014. Earlier this month, the microblogging site expanded a service that markets direct promotions to viewers who tweet aboascii117t shows they&rsqascii117o;re watching on television.
Twitter Partnerships

Twitter also has bascii117ilt partnerships with television networks sascii117ch as Walt Disney Co.&rsqascii117o;s ESPN; Viacom Inc.&rsqascii117o;s MTV and Nickelodeon; and Time Warner Inc., owner of TNT, TBS and CNN. The agreements let the company stream videos on its site and split the resascii117lting ad revenascii117e with the networks, a person familiar with the matter said earlier this year.

Silicon Valley companies have had difficascii117lty lascii117ring away ad dollars from television networks becaascii117se of a lack of a single measascii117rement system that compares TV aascii117diences directly to Internet aascii117diences. Figascii117res from measascii117rement companies sascii117ch as ComScore Inc. are difficascii117lt to compare against ratings from Nielsen, the dominant firm for measascii117ring TV ratings.

Nielsen started working with Facebook three years ago on an effort to coascii117nt Internet viewership the same way it does with television. Nielsen relies on Facebook&rsqascii117o;s ascii117ser data to create ratings measascii117rements for online content, whether it&rsqascii117o;s an ad or a TV show streamed over the Internet.

Facebook sees the Nielsen partnership as a boon in its effort to sell more video advertising, an execascii117tive familiar with the plans said. Advertisers will be willing to spend more if they&rsqascii117o;re able to present comparable Nielsen ratings figascii117res, the person said.

In a separate report released today, Nielsen foascii117nd that Facebook attracts more 18- to 24-year-old people dascii117ring prime-time viewing hoascii117rs than any of foascii117r major television networks.
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