Google Still Trying to Figure Out a Business Model for Video

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Video on the web would help drive a huge shift in advertising dollars over the next five years, Nikesh Arora, president of global sales operations and business development at Google, said at TechCrunch Disrupt this morning. But he said that Google and others still had a long way to go to figure out how best to monetize video on the web.

“In the next five years, 50 percent of all content will be consumed digitally,” Arora estimated. That could drive online advertising — which is currently about a $50-$60 billion business globally, according to Arora, to grow by four or five times. Key to that growth will be video, for which Arora sees a lot of innovation happening over the next several years.

“As the video world figures itself out on the web, I think that will be the next revolution in our lives,” Arora said. “If you can find a way of monetizing video right, you’ll see huge shifts of advertising dollars.”

Arora declined to tell interviewer Michael Arrington exactly how much revenue YouTube generates for Google, saying only that it’s still early days for the video ad market, and as such it has a lot of innovation ahead of it for delivering ads against those videos. Arora drew a comparison between today’s online video ad market and the market for television ads in 1959, 10 years after TVs were first sold. He noted that the first Barbie television ad, which ran in that year, was little more than a video of the doll with the radio jingle playing in the background.

“You see that ad and you think, ‘It took them 10 years to make that?’ We think we’re in the same stage on the Internet, as far as YouTube or video monetization is concerned,” Arora said. “We’re all taking ads that are made for TV, cutting the to 15 seconds and putting them in front of video on the web…That’s not the answer.”

While Arora said there’s still plenty of innovation left to happen, results at YouTube have been improving over the last several quarters. The Google-owned online video site has been ramping up the number of videos it monetizes, and could pull in close to a billion dollars in revenue — and finally reach profitability — this year, according to analysts.

Watch live streaming video from disrupt at livestream.com

Related content on GigaOM Pro: Google TV: A Big Test For Sony (subscription required)

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