Will Facebook’s New Video Ads Compete With TV Sales?

After several delays, the social media company formally introduced its potentially controversial video ad plan this morning — which helped Facebook shares rise about 2% in early trading, touching a new high of $55.18. “Without having to click or tap play, videos come to life in News Feed and start playing without sound,” Facebook says. The initiative, officially billed as a test, will start with promos for Lionsgate’s upcoming film, Divergent. Facebook says that people who aren’t interested can scroll past the ad while those who click on it will see the video play in a full screen with sound. When it’s over, viewers will see a carousel with access to two additional videos. Facebook says that mobile users don’t have to worry that the ads will eat into their data usage: They’ll be downloaded in advance when the smartphone or tablet has a WiFi connection. This still a work in progress. The company will “continue to refine this new way for brands to tell stories on Facebook to ensure the best experience for people and marketers.”

Investors are optimistic, with Sterne Agee’s Arvind Bhatia raising his price target for Facebook to $60 from $58 this morning. “There has been talk that video ads could command $3M+ daily and we estimate video ads could represent as much as 5% to 10% of Facebook’s advertising dollars in 2014,” he says. Ultimately, they “will help Facebook more directly go after the $200B+ worldwide TV advertising market.” As many as 100M people use Facebook during prime time. But Benchmark analyst Mike Hickey warns that although the video initiative is “a vital component of Facebook’s long-term plans to turn a profit,” it also “is likely to be met with some resistance from some users, who are notoriously precious about any changes to the Facebook experience.”