Google's YouTube is looking for a bigger slice of the online advertising pie.
took a major step toward answering how it would derive financial value from video-sharing site YouTube
August 21, rolling out ads in videos from select partners such as Ford Models and Warner Music Group.
Finding unobtrusive ways to plant ads in videos has been a major challenge for search vendors such as Google, Yahoo
, which are always looking for innovative ways to monetize search to capture more cash from online advertising.
Making money through videos ads became one of Googles missions when it acquired YouTube last year for $1.65 billion. eMarketer expects the market for online video advertising to smash the $1 billion barrier by next year.
To that end, the new in-video ads from YouTube are straightforward. When a user clicks on one of the anointed videos, a semitransparent ad pops up on the bottom of the screen as an overlay in the first 15 seconds, clouding about 20 percent of the screen.
Users can choose to click on the overlay, which will pause the video, and watch the ad. When the ad is over, the video will automatically resume playing. If the user doesnt click on the overlay, the ad will disappear in 10 seconds. Users who have no interest in the ad once they click on the overlay can simply click the X in the right-hand corner and the video will immediately resume playing.
For example, in this Warner Music Group video,
an interactive Flash ad for new WMG albums pops up, allowing users to scroll through a list of new releases. In this WMG video
, an ad from Fox Interactive Network previews "The Simpsons Movie."
Read more about YouTubes new in-video ads on Google Watch: YouTube Now Running Ads in Select Videos
"The interesting thing is that, with this format, people in creative do not have to limit themselves to 15-, 20- or 30-second spots," a Google spokesperson said. "We have full-length trailers for the movies "Hairspray" and "The Simpsons Movie" and we found that the people who clicked through to watch the video were watching that ad in crazy numbers."
So, how do Google and its partners make money from this? The Google spokesperson said it works the same way it always has for advertisers who want to place ads on YouTube, which is similar to Googles AdSense network. That is, an advertiser pays $20 for every 1,000 impressions, also known as a CPM.
In this case, the impression counts not as a click-through, but as the appearance of the ad. That revenue is split between YouTube and the select partner on whose content the ad is running, though Google isnt disclosing exactly what the split is.
Click here to read more about Microsofts purchase of aQuantive to bid for more online advertising dollars.
So, in the case of "The Simpsons Movie" ad created by Fox Interactive Network, Fox pays the $20 CPM, which is split between Warner Music Group, which is hosting the movie trailer on its video, and Google.
YouTubes new video play could be a significant force in the push to monetize online video. To date, advertisers have been loath to hoe this field because it is so green and unpredictable.
One problem is the wealth of user-generated content on YouTube. Advertisers may not want to spend the time and effort crafting ads for a video tutorial on how to eat with chopsticks because they cant be certain what audience will view it.
For the time being, YouTube will air video ads on so-called "brand-friendly" videos that lend themselves to easy audience targeting.
Such ads answer some of the questions about YouTube, but what about Google Video, which recently caused an uproar by discontinuing its download-to-own/download-to-rent feature? Will there be in-video ads on Google Video content?
This is unlikely. A Google spokesperson said the company continues to position Google Video as the place to search for video content regardless of where its hosted.
YouTube, with its powerful brand and 1 billion queries a month, will be the primary place to where content is hosted. Accordingly, there is little justification to do in-video ads on Google Video.
"Ultimately, we envision most user-generated and premium video content being hosted on YouTube to further enhance the user experience," the spokesperson said.
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