Home Google Launches YouTube Video Ads: Is AdSense for Video Far Behind?

Google Launches YouTube Video Ads: Is AdSense for Video Far Behind?

Google made two big video-related announcements in the past 24 hours: that they are going to begin including videos in Google News content, and perhaps more importantly, that they are finally rolling out their overlay ads on YouTube. This month we profiled two companies trying to break into the video ad space, Adotube and LiveRail. Of the two, Adotube’s overlay ads are the most similar to Google’s new YouTube advertising, though both companies utilize a similar “click-to-play” strategy instead of an automatic pre-, post-, or mid-roll approach.

YouTube is Google’s second most popular product after search. When Google introduced contextual text ads to monetize search results in 2000, just a few years later (in 2003) they took the next step by bringing those text ads to the long tail of the web and gave publishers of all sizes the ability to monetize their content. The service, called AdSense, has been a huge moneymaker for Google and helped solidify them as the leader in text advertising. So that got me thinking: can AdSense for video be very far away?

Google’s overlay video ads work by displaying a semi-transparent ad on the bottom fifth of videos 15 seconds in. The ads animate for up to 10 seconds, and when clicked launch a video advertisement inside the player (pausing the video the user was watching). Our network blog Last100 compares them to the promotional animations that run on the bottom of television shows.

Oddly, Google has chosen a CPM model (a flat fee of $20 per 1000 video impressions) rather than their bread and butter cost per click model for the YouTube ads. Extrapolating from stats seen on his network, LiveRail CEO Mark Trefgarne estimates that Google could see a click-thru rate of 4-5%, which would lead to about a $0.45 per ad view rate on average. “Google must believe that advertisers will prefer the predictability of a flat CPM basis for total spend but uncertain cost per view, rather than a less certain total spend, but very predictable cost per view,” theorizes Trefgarne on his blog.

But as YouTube clearly demonstrates, user generated video content is on the rise. According to eMarketer, there will be nearly 238 million creators of user generated content worldwide by 2011. As small businesses take matters into their own hands and become more comfortable with video advertising, the way they have become comfortable with managing their own ad campaigns on AdWords and AdSense, a CPC model for YouTube’s video ads could certainly be palatable for advertisers. Granted, creating video ads is not as simple as creating text ads, but YouTube proves that 1. amateur videos can be entertaining/worthwhile and 2. people are more than willing to make and watch them.

I think that an AdSense for video is an inevitable future. Google can offer two things to advertisers: a huge pre-built distribution network (via YouTube), and sophisticated bidding and campaign tracking tools (via AdSense). For publishers, Google can offer a sophisticated monetization strategy, and they can also offer hosting (though they need to offer a non-gallery option — i.e., videos that are hosted by YouTube, but not displayed on YouTube.com).

I asked Mark Trefgarne for this thoughts this morning on YouTube’s advertising, and the potential of a Google AdSense for video in the future. Trefgarne wasn’t overly concerned by Google saying that he thinks the market can support more than one video ad network operating in different niches.

“Although Google will no doubt corner the monetization of user generated content thanks to their control of YouTube, that same card will hinder their ability to work with premium content publishers. Google have made a strong commitment to YouTube, but its video-gallery model necessitates near total copyright hand-over; as a result most serious content producers are afraid to go near it.”

He disagreed with me that Google’s entry into the long tail of video advertising is inevitable. “I don’t think its coming anytime soon,” he told me. But Trefgarne was ultimately energized by Google’s video ad product. “Google will have an enormous impact, and will be the biggest player for some time to come,” he told me, “but from our perspective their entry simply re-emphasizes the importance of this market, and further legitimizes our model.”

What do you think of Google’s new video ads? Do you think they should expand their offering to third-party publishers and create an AdSense for video? Will they? Leave your thoughts in the comments below.

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