Google: No Silver Bullet for YouTube Ad Model

More than two years after purchasing YouTube for $1.6 billion in stock, Google continues to try a variety of methods to introduce advertising to the site.

In its latest move, Google is taking a page from the playbook that built it into an Internet giant: it’s showing ads next to YouTube search results. Just like Google, advertisers will be able to purchase keyword-targeted placements for their YouTube videos on a cost-per-click basis. YouTube executives admitted the product, called “sponsored videos,” is not a revolutionary idea since it is a nearly exact clone of Google’s “sponsored links.”

“In hindsight, this seems like a natural transition to YouTube,” said Matthew Liu, product manager at YouTube, in a videoconference with reporters. “As easy it sounds, there are a lot of intricacies.”

YouTube executives said the system would “democratize” advertising by selling placements to large brands, small companies, even eager video creators looking to get more views. Advertisers will pay when users click to watch their videos, which must be housed on, not the advertiser’s Web site.

The search product is one of several initiatives Google has taken to middling success at turning YouTube’s enormous audience — it attracted more than 80 million unique visitors in October, according to comScore — into a big advertising channel. Google CEO Eric Schmidt admitted in April that the Internet giant hadn’t yet found the “perfect solution.”

In addition to search placements, YouTube carries user-initiated ad videos on its home page and regular placements. It runs video-uploading contests and shows overlay ads on the bottom third of the screen for a small number of videos. It also has a few deals with media companies to show full-length TV and movie content with in-stream advertising, including pre-roll spots. Last month, YouTube added a “click to buy” option for music videos that allows users to buy the songs playing.

In short, Google hasn’t hit on a single format that will convert YouTube’s millions of viewers into a viable advertising audience.

“We build different advertising products for different environments and different behaviors of users,” said Shishir Mehrotra, director of product management at YouTube. He cited the targeting of contest invitations to the video upload page as an example of a good fit.

One place Google is not going with its efforts is onto YouTube advertisers will not have the option of having their videos show up as ad placements for video-related searches there.

Fox Searchlight promoted the art house movie Choke through both sponsored videos and in-stream spots. In total, it was able to generate 2 million views of the trailer over six weeks. It was the combination of tactics that made the effort work for the movie, which is about sex addiction.
“I think that’s one of the beautiful things about it,” said Daina Middleton, svp at Moxie Interactive, part of Publicis Groupe. “They’ve been beat up for not finding the one form. But maybe the form is having a broad enough toolset so advertisers can customize what they need to the actions they want.”

While many of the searches on YouTube are entertainment related, executives insist they are observing a wide variety of behavior on the site, including searches for informational content.

Bank of America, a test advertiser, ran placements on the site tied to “finance crisis.” The ad links to a BofA-sponsored YouTube channel with financial advice videos from Bloomberg, Bankrate, CBS-owned Wallstrip and others. Other campaigns have included movie promotions, tech products and an OfficeMax back-to-school push that drove views of its “hidden prank videos.”

Zagg, a 70-person company in Salt Lake City that makes protective film for gadgets, has run a campaign for a month to drive views of its YouTube videos showing product demonstrations, parodies and man-on-the-street interviews.