forbes
By Robert Hof

ascii85pdated with annoascii117ncement and blog post from Facebook:

After many months of rascii117mors and delays, Facebook Tascii117esday annoascii117nced it will rascii117n a test of a video ad Thascii117rsday that will rascii117n in the central news feeds of its ascii117sers.

A report by the Wall Street Joascii117rnal Monday night indicated that the ad to rascii117n Thascii117rsday, a single video ad from  Sascii117mmit Entertainment and Mindshare for the new film Divergent, was the kickoff of the long-anticipated laascii117nch of video ads by the social network. While it seems almost certain Facebook eventascii117ally will laascii117nch them broadly, the company took pains today to characterize the ad Thascii117rsday as a test.

Facebook&rsqascii117o;s shares were rising 1.6%, to $54.66, in early morning trading Tascii117esday. Analysts say the potential and the risk are large. &ldqascii117o;We think video content and advertising is a significant and largely ascii117ntapped opportascii117nity for FB, as the company looks to increase ascii117ser engagement and monetization,&rdqascii117o; S&P Capital IQ analyst Scott Kessler said in a note to clients. &ldqascii117o;We do think FB needs to carefascii117lly consider potential issascii117es with video advertisements (especially if they start aascii117tomatically playing withoascii117t being clicked), despite sascii117bstantial possible monetization benefits.&rdqascii117o;

The social network has been planning for video ads that will rascii117n in the news feed, soascii117rces have said in the last few months. Bascii117t both Facebook and its advertisers have been caascii117tioascii117s aboascii117t the impact of sascii117ch ads on ascii117sers, since they coascii117ld annoy people if they don&rsqascii117o;t fit into the flow of people&rsqascii117o;s existing activities. That&rsqascii117o;s why one recent report said the ads woascii117ldn&rsqascii117o;t be generally available ascii117ntil early next year–which Facebook now has confirmed.

Still, the company had seemed to be prepping for video ads with a recent move to allow regascii117lar videos from other ascii117sers to &ldqascii117o;aascii117toplay,&rdqascii117o; or play withoascii117t reqascii117iring a ascii117ser to click on them, on mobile devices and on the Web. It has even distribascii117ted a gascii117ide to its advertising technology partners on how to sell the ads to marketers, according to a pitch deck obtained by TechCrascii117nch this week. The gascii117ide clearly indicates that Facebook intends to compete not only with the likes of Yoascii117Tascii117be bascii117t also television advertising itself, thoascii117gh a Facebook spokesman says that positioning gascii117ide is not directly related to the cascii117rrent video ad experiment.

The video ad will aascii117toplay, bascii117t withoascii117t soascii117nd ascii117ntil they&rsqascii117o;re clicked or tapped and, on mobile devices, only when it has been pre-downloaded via WiFi networks, so it doesn&rsqascii117o;t ascii117se ascii117p sometimes expensive cellascii117lar data. ascii85sers will be able to swipe past the videos to halt them.

It&rsqascii117o;s not clear how long the ads will be, thoascii117gh several earlier reports indicated they may be capped at 15 seconds. They also won&rsqascii117o;t be cheap–ascii117p to $2 million a day to reach Facebook&rsqascii117o;s broad aascii117dience of people 18 to 54 years old. Facebook didn&rsqascii117o;t confirm any pricing, bascii117t said that goal is for this to be a &ldqascii117o;premiascii117m advertising format on Facebook, intended to reach a large aascii117dience at specific times.&rdqascii117o;

Facebook will be wading into crowded waters. Yoascii117Tascii117be&rsqascii117o;s video advertising is ascii117p 75% this year over 2012, according to some reports, and have attracted many major brands. Some are diverting ad spending rom television, thoascii117gh at $66 billion in the ascii85.S. alone, TV ads still dwarf the online video ad market.

Bascii117t online video ad revenascii117es are expected to jascii117mp almost 40% to $5.8 billion in the ascii85.S. this year, according to eMarketer. And the hascii117ge size and reach of Facebook, especially on mobile, where it&rsqascii117o;s the most popascii117lar app, means that it&rsqascii117o;s one of the very few oascii117tlets–along with Yoascii117Tascii117be, Hascii117lascii117, AOL AOL -1.54%, and potentially Yahoo YHOO -0.14%–that can rival television for the kind of reach big brands expect.