YouTube Selling More Ads To Larger Advertisers — But Only On A Fraction Of Videos

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YouTube may finally be making some headway in convincing big marketers to get over their phobia of user-generated content. A new report from Piper Jaffray analyst Gene Munster says YouTube is selling in-stream advertising on more videos and adding new major advertisers. The report surveyed the top 100 videos (by views) on YouTube during a single week in February with an eye toward how many played ads and what kind of ads ran. Munster found that:

— 72 percent of the ads displayed were in-video ads versus 52 percent in January and 63 percent in December.

— New major advertisers on the site added included Verizon (NYSE: VZ), Adidas, Xbox, Disney (NYSE: DIS), Kraft, and Chevy.

— YouTube will start charging people to download some of its videos.

— 12 percent of the top 100 videos, including ones featuring Mercedes-Benz and Microsoft’s Halo, were branded promotional videos.

— 29 percent of videos had an ad versus 25 percent in January and 30 percent in December

In-video ads are higher quality (and have higher CPMs) than so-called run-of-network cost-per-click ads, so more in-video ads represents progress for the company. Still, YouTube sells ads on only a fraction of its videos — YouTube itself hasn’t said publicly what that percentage is, but the common speculation is about 25 percent — and so it still has a long way to go to turn itself into an ad-revenue-generating machine.

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Peter Contardo

It’s great to see that some big brands are finally opening up to user-generated content and recognizing the benefits of advertising on video sharing sites – something that many brands and agencies still struggle with.

However, this raises some questions: How does YouTube compensate those content owners whose videos are associated with ads? And what about YouTube publishers that aren’t one of the Top 100? What monetization options do they have?

There are smaller brands and emerging companies also looking to reward content owners who consistently attract and engage a niche audience. By going beyond YouTube, content owners can generate advertising and sponsorship revenue from their own Internet TV platform, while maintaining control of their brand and managing the viewing experience associated with their content.

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