Monday, October 09, 2006

Google's YouTube Strategy

Google execs recognize that advertising revenue from video should be one of the centerpieces to the company's continued growth, hence the reported interest in YouTube. Now they are hiring a director of video advertising (according to MediaPost), only about a year too late.

YouTube would be a smart purchase because it would keep someone else from owning the biggest player one of the fastest growing traffic areas. But whether or not Google gets its money's worth depends on the advertising and compensation model.

Google can make money from the search traffic by displaying some banner and contextual ads, but that' small potatoes. And they can charge advertisers to promote movie trailers or promotional videos, and to push free TV content with inserted ads instead of asking 99 cents.

The challenge is to get advertisers to buy into pre-roll ads before user-generated videos. This requires selling ads against the user-generated stuff that is not objectionable while still streaming the risque or potentially offensive video as a cost of doing business. If Google were to start sensoring content, they would lose a lot of users, so that is not an option.

Google should adapt its CPM model for video by paying the individuals who create lots of traffic for them. If a blogger can put AdSense on her site and get paid, then certainly the vlogger who submits a video also deserves compensation. This means creating millions of new accounts, but Google has familiarity with the process.

I'm not sure that Google will do the deal with YouTube; perhaps it will be Yahoo that will try to level the ad revenue playing field.

Posted By John Gartner at 09:49 AM
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Comments by synthetron : Monday, October 09, 2006 at 05:40 PM

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