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Ads on YouTube: A Portent for Web

Apr 6, 2008  •  Post A Comment

YouTube may command a third of all online video views, but it’s still working to capture the hearts of advertisers.
It’s a courtship whose success (or lack thereof) will portend the future of the Web-video advertising economy. If the No. 1 video-sharing site can’t figure out how to make marketers feel safe putting their commercials next to its mishmash of content, woe unto the small Web studios and wannabe stars who are hoping to cash in.
YouTube, purchased by Google for $1.65 billion in 2006, in May implemented targeting to pair ads with content, but those spots appear next to a tiny fraction of the site’s videos. Right now, only videos from creators in YouTube’s partner program are eligible for ads; material such as graphic violence, nudity and defamatory content is screened out.

“Google has had a difficult time monetizing YouTube for two reasons,” said Michael Hayes, senior VP of interactive at Initiative North America. “They can’t monetize the whole thing and they haven’t figured out a good way to match the companion ads to the video.”
Reversing that perception is part of the job for Jordan Hoffner, YouTube director of content partnerships. His team has inaugurated partners into YouTube’s advertising program such as CBS and Showtime, as well as Web creators like Smosh and LisaNova.
By adhering to YouTube’s content guidelines, the partners make their videos eligible for ads. The program also tends to screen out videos of little Jimmy’s birthday party.
“The only times we are running ads on video is if it’s a partner video,” Mr. Hoffner said. “We don’t run ads on user-generated videos. I see all these statements that advertisers don’t want to run ads in front of cats with skateboards, but that doesn’t happen.”
Keen on Categories
YouTube lets advertisers target their ads at certain categories, such as music, comedy or how-to videos.
“If they say they want to reach adults 18 to 24, our system determines what sort of partners fit into that,” Mr. Hoffner said. “When it comes down to specific videos, there are always times when something runs on TV and the advertiser isn’t happy about it and the advertiser is made good.”
YouTube’s system for slicing and dicing content to pair with ads “helps manage inventory for buys,” he said.
If YouTube can’t figure out how to pair major advertisers’ spots with a broad array of content, then Web video is more likely to end up resembling television, dominated by safer fare from broadcast and cable networks.
For creators who make it into the YouTube partner program, a couple million views a week could translate into a couple thousand dollars in income, a YouTube representative said.
On the sponsor side so far, the program has attracted spots from big-time advertisers including General Mills, Toyota and several movie studios.
The company may still have some distance to go before its partner system works seamlessly. Late last week, for instance, an Ikea ad was mated to a popular video dubbed “I’m Out of Toilet Paper” by YouTube partner Vlogolution that featured video of a woman shot from the knees down while on the toilet.
Ikea acknowledges the peril of some YouTube content.
“Having Ikea TV ads on YouTube is an adventure,” said Ikea spokeswoman Mona Liss. “There are so many posted and it does present some interesting challenges for us.”
The video giant could be making more if it provided more safety for advertisers, ad experts say. Bear Stearns said last month that YouTube will generate $90 million in revenue this year. That’s the annualized yield on delivering one-third of the 9.8 billion videos watched in the U.S. last month.
YouTube declined to disclose financial information on ad growth.
A company representative said the site has been cautious about introducing new forms of ads and tested its latest offering, video overlay ads, for several months before rolling them out in August. Those overlays appear over the lower portion of a video as the clip plays.
T.S. Kelly, senior VP of research and insight at Havas Digital, says he’s been reluctant to place branded advertisers in front of video content on YouTube. He’s more comfortable putting them on sites such as Hulu, the News Corp.-NBC Universal online video venture, and broadcast network sites.
Seeking Control
“YouTube doesn’t give us the same level of quality and control that we would want from a video environment,” he said. “If there was a way for us to buy specific themes or partners where we feel much more confident, we would do that.”
Havas Digital has run banner ads on YouTube for clients interested solely in boosting the number of click-throughs to a site, he said.
Other advertisers are willing to take a chance on YouTube. MediaVest has bought both banner ads and video ads for clients including packaged goods companies, said James Kiernan, VP and group director at MediaVest.
“They do have a loyal audience, and that audience seems to respond to display ads,” he said.
He’s satisfied with YouTube’s ability to pair ads with videos.
“The example I throw out there is we know kids across the country are submitting their skateboarding videos, so if you have a brand trying to reach a young consumer, we could collect all the best of that footage, have it reside in one area and have the brand wrap around.”

20 Comments

  1. i’ve seen the vlogolution toilet paper video you’re talking about and it seems like you missed the point of the video completely. it was actually making a political statement on the declining value of the dollar into eventual zimbabwe like hyperinflation. sounds like a pretty deep message to be so easily overlooked by you and your article. not even saying that you’re wrong in your general assessment of some videos as they relate to advertisers. it’s just ironic that you chose to pick one of the few videos on youtube that was trying to bring to light real issues that we face.

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