In the past, advertisers were charged their average cost per click amount every time a user clicked on a promoted video ad, irrespective of whether or not the user then actually viewed the video. This system obviously was not ideal for advertisers and is therefore due to be changed.

From the 25th of May, promoted video ads on YouTube will be charged on a CPV basis, which means that the advertiser will only be charged when a user actually begins to view the promoted video. This change will benefit advertisers as the number of times they will be charged for clicks could be reduced, giving them a better return on investment.

Promoted video ads on a YouTube search results page

Now, when a new promoted video campaign is created, advertisers will be required to set a maximum CPV, which represents the maximum amount they are willing to pay per view of the promoted video.

AdWords will continue to use the old format of charging only one cent more than the next advertiser who is competing for the same slot on the page, with similar keywords. Advertisers can continue to set up the campaigns in AdWords or at ads.youtube.com as before. From the 25th of this month, the billing terms for all the video campaigns will officially be converted from the CPC model to the CPV model.

Advertisers may continue to see the CPC terms in their campaign for some time as additional CPV reporting formats are introduced gradually.

According to Mahaney’s estimates, YouTube will generate about $945 million this year, of which $614 million will be net revenue or profit. He further expects that the largest online video site will continue to grow and will generate over $1.1 billion next year, of which over $700 million will be net profit.

Mahaney explains that he has arrived at these figures by applying the same revenue-to-page view ratio on the stats available for YouTube that fellow video sharing site, MySpace, uses.

Patrick Walker, who is a director of video partnerships for Google and YouTube, also believes that YouTube is doing pretty well for itself. According to him, the fact that YouTube has the ability to make lots of users see its ads makes the site inherently very profitable. Also, the fact that they help to sell a lot of CDs and DVDs is very helpful to build a marketing case for YouTube.

Google, as usual, has not yet made any official comment on the matter.

Believe it or not, this is already happening!

Video ad loading in a magazine

The first video ads in the print media were published last month in an American magazine, Entertainment Weekly.

A full-page cardboard insert was placed within the magazine containing a small screen, which advertised the diet drink Pepsi Max, and also had trailers of shows on the U.S. television network, CBS. As if that is not sufficient, the insert also contained built-in speakers for the user to listen to the ads.

This amazing feat has been achieved by inserting a small chip in the cardboard page within the magazine. The chip gets activated automatically when the concerned page is opened. It works in a manner similar to a singing greeting card.

The screen is about the size of a mobile phone’s display screen, contains rechargeable batteries and can carry up to 40 minutes of content.

While the invention is quite interesting to say the least, some users do not like it as it makes the magazine quite bulky and the cardboard insert makes it impossible to fold the magazine. It also makes it quite difficult to flick through the pages of the magazine.

Another drawback is that once the page is opened, it takes several seconds for the video to load and start, which could result in users losing interest.

Copies of the magazine have been sent out to several subscribers in New York and Los Angeles.

Americhip, the company that manufactures these screens, has estimated that each screen would cost about $20. The novelty of this medium, though, could easily justify the additional advertiser expense.

Oonce this form of advertising gains greater acceptance, it could drive the manufacturing costs down, but could also result in user apathy or even frustration at technology turning a quiet few minutes spent reading a magazine into a noisy, flashy flurry of images.

It so happened that Jill Peterson and Kevin Heinz from Minnesota, who were due to be united in holy matrimony, wanted to have an unusual wedding party.

They decided that the bride, the groom and all of their bridesmaids and best men should dance to the song ‘Forever’ by Chris Brown in the church. This unusual entrance was video taped and put up on YouTube, where it has become wildly popular.

So far, the “Forver wedding video” has been viewed by more than 12 million viewers, in just over a week, making it the most viewed and most discussed video on YouTube, globally.

Rather than pull the video, or sue Google for copyright infringement, Chris Brown’s record company allowed the music to be used and InVideo Ads were placed to make it possible for users to buy the song from Amazon or iTunes.

A lot of users have responded positively to this offer, earning YouTube, Amazon and Apple a good amount of money.

The record company, Sony, and Chris Brown have also made a pretty penny, not to mention the badly needed positive publicity for Chris Brown that they have earned by not suing the couple for copyright infringement (a first for the music industry?).

Searches for ‘chris brown forever’ over the past 90 days

While all of these beneficiaries have the young couple to thank for the unexpected bounty, the couple has not made a penny out of their own video. They were invited to appear on the Today Show in New York, along with all their guests. They are also using all this publicity to drive donations to the Sheila Wellstone Institute for violence prevention.

Hopefully this incident will be an eye-opener for video sites and music owners and show them that they can make money by other means than prosecuting consumers for sharing and downloading music.

The Forever Wedding Video

These pre-roll ads are run around TV shows and clips on their site.

To begin with they have tied up with their existing partners Channel 4, BBC Worldwide, National Geographic, ITN and Discovery Networks as reported in ‘The Guardian’.

The broadcasters who accept this scheme will be eligible for a revenue sharing partnership with YouTube. In the past these partners were earning revenue only from the display ads and in-video format.

Some advertisers such as Nissan, Renault, Warner Brothers, Match.com and Activision have already tied up with YouTube for this service, and Channel 4 was the first among them to run the pre-roll ads to promote the comedy ‘The Hangover’. The pre-roll ads will be run for 15 to 30 seconds, and will be run on a CPM basis.

According to Suveer Kothari, Head of YouTube U.K. YouTube has been trying to maintain a balance between the demands of their users who want free but entertaining and professional content on the web, against the demands of premium content owners, who obviously want to monetize their content on the one hand, and the demands of their advertisers who want more premium content to showcase their TV creative against on the other hand.

He believes this service will help them to attain that balance.

YouTube RealTime shows up as a bar on the bottom of all pages on the site for users who are logged in and participating in the beta test. Not only can participating users see which of their friends are online, but they can also see which videos those friends are watching, and what they think about the videos, based on the comments posted by those friends.

Screenshot of RalTime toolbar showing friends’ video views

The first button on the toolbar indicates that RealTime sharing is activated. The service can be turned off so that users share only videos they wish to. Adjacent to this is a button that is enabled when the user watches a video. Clicking on the button shows a list of other users viewing the same video.

An ‘Online Friends’ button shows a list of friends currently logged into YouTube. The last button, a little bell with a number beside it

During the closed testing period each user can invite up to 25 online friends to try RealTime and share their viewing experiences. While this limits the number of users who can trial the service, it is gradually expanding, as each invitee is given 25 invites to distribute further. Google had used a similar trial invitation system when Gmail was first launched.

A lot of YouTube users go to the site without any specific video in mind. They could be particularly interested in finding out what their friends are viewing and then sharing these videos with other friends. The added video views could generate more ad revenue for YouTube and its advertisers.

This is not the only change coming to YouTube. The video sharing site recently unveiled two new sections featuring full-length movies and TV shows and a limited number of users are also trialling a new channel layout.

Sample new channel layout on YouTube

According to the Google AdSense blog, the AdSense video unit, which enables publishers to show YouTube content and ads on their pages, on a revenue sharing basis, has not performed as well as it was expected to do, and Google will discontinue the service at the end of this month.

Publishers who wish to continue publishing video content from YouTube can do so directly through YouTube.com, but they will not earn any revenue for this.

Video ads will remain functional and will continue to appear on AdSense-enabled pages of publishers who enable the the image ads option.

Google will continue to accept ads from registered publishers until the end of this month (April). New publishers will no longer be able to incorporate video units on their sites.

While Google says they are taking this step to better focus on other opportunities, to help their publishers earn better, it seems suspiciously like yet another move to beat the recession.

Only last month Search Engine Round Table had pointed out that AdSense publishers were upset and complained on two separate AdSense forum threads that their sites were generating very little revenue from AdSense video units. Some of the comments posted on the AdSense forum were:

“My revenue is down more than 50%. There were people who were expecting to earn $200 in January and instead earned $80. I was expecting $1000-$2000 and earned a little over $80.”

“I had $67 in Content Host earnings (63,600 views/1000 clicks) and only $17 in YouTube earnings… sheesh”

One reason for this poor performance could be the current economy. Another could be the fact that it is difficult to target ads consistently based on videos.

It is relevant to note that Google is struggling to monetise YouTube, and this could be the first sign that Google is accepting the fact that it might never be as successful with video advertising as it is with search.

Rich Ads on Yahoo! Search results pages are being tested by a handful of advertisers since the end of 2008, and so far the results are encouraging. In fact, Yahoo! claims their advertisers have reported a rise of 25% in the click through rates for these ads. Not only that, the brand exposure and conversion rates have also reportedly increased significantly.

This new service allows the advertiser to add video, images, custom links and custom search boxes within their ads. These ads are placed in a separate box than the regular “Sponsored Results” and are labeled as “Promotional Results“, as shown below:

Click on the image to see a live Rich Media ad on Yahoo! search

Advertisers will also now be able to customise the ad to suit their needs. It will also be possible for them to decide the day, time and other demographics, for when the ad should appear, as is seen with TV and radio ads.

Google tested video ads in search results last year, but they have not gone mainstream with the feature. Yahoo! seems to be following in Google’s footsteps, but seems determined to beat them to the punch in delivering a rich media ad solution first.

Ads with the video and images embedded within the search results would certainly increase the impact that the ad has on the user. Yahoo!’s Rich Ads also allow the creation of deep links to the relevant pages and they can also contain boxes to enter data or select from lists of products, allowing customers to search for the product without having to navigate away from the page. Brand logos can also be incorporated into the ads.

While these features help advertisers and agencies to increase brand recognition and advertiser conversion rates, making them attractive to advertisers, it is not doubtful that they will make Yahoo! any dearer to end users. The company is desperately trying to lure advertisers, and could be shooting itself in the foot by alienating end users in the process.

Michael Walrath, Yahoo!’s senior vice president advertising marketplaces group says, “As the economy continues to put pressure on advertising budgets, marketers are looking for increased accountability for every dollar they spend. Yahoo!’s new targeting products significantly improve the ability for search and display advertisers to reach their target audience providing increased efficiency and accountability.”

Don’t they ever learn? Google had it right to start with – forget advertisers – concentrate on getting users and the advertisers will automatically follow.

For a long time now, YouTube has been engaged in a tussle of sorts with big media companies. These companies feel that YouTube’s policy of allowing users to upload content produced by the media houses is a violation of copyright laws.

Given the fact that YouTube is the most popular online video site, media owners are better off being on YouTube’s side rather than getting into a legal battle with them. However, some companies like Viacom have sued YouTube in the past.

TechCrunch reports that a new proposal from YouTube will allow these content providers to sell ads on YouTube, alongside their own videos. Content owners will obviously be given a share of the revenue thus earned, which should please them and may even induce them to change loyalties from other sites such as Hulu and TV.com, which they currently patronise.

According to Ars Technica, a few companies such as CBS already have such a deal with the Google subsidiary, but it could now be expanded to include others.

YouTube will gain from this arrangement as they will be able to better monetise their content and earn higher revenues than they have been able to do so far. It will also increase their share of media content received from big media partners, which is only 4% at present.

Last but not the least, users who upload various videos including content from larger media companies on YouTube will no longer have to worry about the videos being removed for fear of copyright violations.

It is expected that this service will be launched by the end of the first quarter of 2009.

While YouTube is an extremely popular video site, and continues to grow by the minute – 13 hours of video are uploaded on YouTube every minute – it can be quite a daunting task for people to find the video they are interested in, as YouTube has quite a mammoth collection.

In order for content owners to build up viewer numbers and fan following as well as to help users find the right video, YouTube now lets content providers promote their videos, thus making it simpler for users to find them.

They have introduced a new advertising program, called YouTube Sponsored Videos. This new service will enable brands and content owners to reach those who are interested in their video content, irrespective of whether they are a big and famous company, or new-comers looking to build a reputation.

YouTube Sponsored Videos

An automated tool allows video creators to decide where they want to place their videos. They can then make bids through an online auction process, similar to the one used by Google Adwords, and also specify a daily budget.

AdWords ad ranking principles will be applied on YouTube too, so that a combination of the ads maximum cost per click bid and the ad Quality Score will determine where the ad gets positioned.

When an interested user searches for videos, the appropriate videos will be shown, along with the regular YouTube search results, under the heading ‘Sponsored Videos’ on a pay per click basis.

This service is still in an experimental stage and further changes will be made as required, based on feedback Google receives from users.

Sponsored Videos on YouTube are available only in the U.S. at present, but will be introduced in other countries at some point in the future.

YouTube is estimated to be the second largest search destination in the USA and the UK. Given the volume of searches this implies, and the success that Google has seen by monetising their main search service, it is but natural that Google would apply the same formula to YouTube. If advertisers and react favourably to this service, it could solve Google’s long-standing dilemma of how to capitalise their acquisition of YouTube.

Google hopes to gain better insights into how users interact with mobile video advertising. Advertisers will be able to use this as a new medium to promote their brand and expand their audience to target the millions of users that access YouTube on their mobiles regularly.

This move will be beneficial for both content producers as well as users, since content producers will be able to use this facility as a means of generating revenue, which will in turn allow publishers to make more content available for free, thereby bringing down costs for users who wish to access videos on their mobiles.

Product Marketing Manager for YouTube, Christine Tsai, says, “This is our first step, in testing mobile advertising for YouTube – it will give you a new way to interact with content on the go, while allowing us to learn.”

Video ads on YouTube are currently available in two formats – InVideo ads and placement targeted ads. Additionally, advertisers can create branded channels on YouTube and promote videos via click-to-play ads. It is not clear at present which formats will be made available when the mobile video advertising service goes live for all YouTube advertisers.

Viewers will be able to find a video that is related to a particular location. YouTube’s product manager Brian Glick, made this announcement during a developer talk session, in San Bruno, California. This feature is already in being trialled in beta and is due for a general launch shortly.

During the developer talk, a demonstration of this feature was presented, using a video connected to the Bellagio casino in Las Vegas as an example.

According to the NewTeeVee blog, users who search for videos on YouTube with a location in the query string will be shown a map icon at the top of the results. Clicking on that map will produce a list of videos connected to that location. It is also possible to narrow the search further, by entering a specific place in that location, such as the name of a garden or a hotel.

About a year ago, YouTube added the geotag option to its videos, which could be specified by creators at the time of uploading, but there was no information about how the geotags were used.The geo-search functional finally makes good use of this feature.
Geo-tagging of YouTube videos is also available on Google Earth, for a few selected videos. Google Maps also shows YouTube videos. The feature will probably be used in the future to allow advertisers to target video ads on YouTube by geography.

In the process of improving their market share, they have indirectly helped Google Video, because they work together. By itself Google Video accounts for barely 4% share of the market.

YouTube’s positive growth has obviously occurred at the expense of other sites. Their nearest rival, MySpace, which commanded a healthy 16% of the market last year, has fallen to just about 9% this May, while even Google Video has fallen from 7.8% to 3.73% in the space of one year. Yahoo! Video, which was always a small player, holding only 2.77% of the market share last year, has fallen to just 1.92% this year.

In fact Veoh, which has the smallest market share in the top 5 category, is the only one other than YouTube, to have shown a positive move from 0.86% to 1.13% which is almost 32% better than their performance last year. This must be at least part of the reason why television network ABC have recently decided to enter into a distribution deal with them.

Further information from Hitwise shows that the total number of people visiting video sites has reduced by 9% compared to last year, and presently accounts for only 1.14% of all visits to the Internet. At the same time, those who do visit the video sites, seem to be spending more time there, as there has been an increase of 6% in the total number of hours that are being spent, watching online videos. 82% of YouTube clients, and 64% of MySpace clients, have been going back to the same site repeatedly.

Whether YouTube’s huge lead in the video market will stifle creativity and innovativeness remains to be seen.

The screenshot below show the search engine results page when a US-based user searches for a cell phone. On the right hand side, the Blackberry ad includes a + sign with a link saying “Watch demonstration”.

Clicking on the link drops down a small movie pane and a video starts automatically playing within the same page, not in a pop up window nor in a new layer.

The video quality is exceptional as is the sound. The technology used here seems to be similar to the video technology that powers YouTube. The video clip lasts 29 seconds.

The video ends with a button including a link to the landing page on the advertiser’s website. Clicking this link or the title of the ad takes users to the regular website, just like any other sponsored link does. The big difference, though, is the additional branding opportunity that including a video within the ad space offers.

This will revolutionise the search engine advertising industry, as advertisers will now need to think of even smarter and more creative ways to reach consumers. Large brands will benefit from this much more than small businesses, though, as SMEs will not typically have the budget to shoot good quality video commercials for their search listings.

Google has not currently provided any further information on the number of such video clips it will allow on a single search results page. Normally one would assume that they would cap this at a handful of advertisers, because having ten demos on a search results page might not lead to a great user experience.

Screenshot of video ad playing in the regular Google search results page

The New York Times reports that Google is running tests of video ads on their regular search results pages.

The relevant question here would be ‘how do users feel about it?’ Will regular Google search users welcome these ads as a sign of progress? Or will they feel imposed upon by Google, and think that these ads are creating a nuisance or a distraction from the once clean form that won Google favour with the masses.

Based on tests done in the past it seems that searchers should be quite receptive to these video ads. According to Marissa Mayer, Google’s VP of Search Products and User-Experience, “With universal search, something is getting shaken up a bit on the bottom part of the page. The ads on the top part of the page should match.”

Video ads will soon appear on conventional search results pages, in a manner similar to the way maps are shown in sponsored links for localised searches. Initially the video will be included with the regular text ad via a small plus sign and a link prompting users to click to play the video. The ad will run only if the visitor clicks the plus button, thus giving users the option to see the ad only if they choose to do so. In the future Google intends to test the ads with a single still image from the video in addition to the plus sign and ‘click to play’ link.

According to Marissa Mayer, in the past all Google searches were based on text and therefore visual ads were not acceptable then, as they might have caused a distraction. But now that the results contain videos and images, text ads are not very effective as the eyes of the user automatically focus on the images.

With the progress in search engine technology it is only appropriate that the ads displayed should also be in a more advanced format. It should be noted that as far back as in May 2006, Google had planned to start a new service to place video ads on its websites. It was found that there was no dearth of advertisers to fill up the commercial space available online.

The video ads are currently available only to a very small group of advertisers and are being tested in an extremely small test group.