YouTube Finally Discovers Ad Format It Can Monetize

In a significant first, YouTube has decided to let advertisers inject their messages inside the video frame for select content on its site (see ClickZ or MediaPost). For an interesting piece that projects revenues for YouTube, see this post by Silicon Valley Insider.

For an example of the ad, see this Smosh video and watch Homer Simpson at 15 seconds in. To see another similar demo (unrelated to YouTube), check out this site by Adjustables (which allows you to drop in various embedded ads).

This is huge news, and here’s why:

  1. It’s a new ad format that I believe balances marketing needs with user experience. As a creator and marketer, I love them. And as a viewer, I can more than tolerate them. They’re not interruptions, and allow me to dig-in or continue with my viewing (as opposed to horrendously long pre-rolls). But they’re also not lost in left field: like basement-price banners that sit miles from a video and get few views much less clicks. Don’t get me wrong- these banner ads may still be worthwhile for marketers because the CPM (cost per thousand) is so cost-effective.
  2. This exponentially raises the revenue that YouTube can make per video view. Grant- I’m biased in this enthusiasm since I am a YouTube partner. $20 CPM is a fair price.
  3. Ultimately, it shows that YouTube/Google is turning the corner on this age-old debate about advertising vs. community. YouTube has always been about community not commercialization. And that’s not a bad thing, but they happen to be in business to make money. Google also tends to build new product/service solutions without considering the advertising implications. Then eventually they figure out how to monetize it.

Some of the community will, of course, object to any new ad format. But ultimately this increases the sustainability of online-video and is a good thing for those viewers who want to retain access to free, quality content.

Now for some key points about the ads — lifted directly from the ClickZ article:

  • The new offering, dubbed InVideo Ads, mimics the clickable ad overlays introduced in recent months on ad networks like VideoEgg and YuMe.
  • Ad product consists of animated bars that obscure the bottom 20 percent of the video frame for a given clip. They initiate 15 seconds after the beginning of a clip
  • InVideo overlays are “80 percent transparent” and remain visible for approximately 10 seconds before shrinking to a small button users can later click to view the marketing message again.
  • YouTube has set a $20 CPM for InVideo ad buys consisting of an InVideo ad accompanied by a tiny in-player companion ad and an adjacent in-page unit.
  • Clicking on an overlay ad pauses the current video and launches one of two experiences brands can choose between. One is a new clip superimposed over the video in progress via a player-within-a-player interface. When the paid clip ends or is closed, the original automatically picks up where it left off. Shiva Rajaraman, YouTube Product Manager, said 76 percent of those who click the overlay and watch the video ad viewed the entire trailer for NewLine’s “Hairspray.”
  • The other option is a Flash-based interactive experience in which the user is invited to navigate an interactive menu. Warner Bros. created such a unit where users can flip through selected album covers (click for example).

During YouTube’s research process, Rajaraman said, “One of the key things we found, not surprisingly, is that when a video is playing on YouTube their attention is [locked in to the video frame]. When we came up with an ad format, we realized that… it needs to be in the player.”

Yet when the Google-owned video portal tested pre-roll placements, YouTube users abandoned video clips at a more than 50 percent rate. The overlay, by contrast, results in an abandonment rate under 10 percent. Not only that, but click rates are five to 10 times greater than standard display click-to-video ads, according to Rajaraman.

Author: Nalts

Hi. I'm Nalts.

40 thoughts on “YouTube Finally Discovers Ad Format It Can Monetize”

  1. one risk is that youtube could lose contributors if they don’t open up their ad sharing campaign to more than an elite… er… select group of youtubers. sure, they’ve been making money off our contributions and we’ve been tolerant, but now that they’re invading the box, they should consider ponying up.

  2. Agreed PC, I’ve contacted them a few times about the partnership program and heard nothing back but the stock answer of ‘click here to apply and we’ll get back to you’. Time to stop baking brownies for Nalts and start baking them for YouTube/George. lol

  3. I don’t get the ads… strange, I heard about this in their blog but I’ve never seen it…

    Have you upgraded to the new Flash 9 Beta? With H264 support? Apparently it’s what youtube will be using when it’s released. Much higher quality videos.

  4. I don’t see the ads either, maybe they’ve taken them offline ??? I can’t offer up my opinion of the ads if I can’t see them… πŸ™‚

    I am curious, and please don’t think I am trying to attack you guys because I am not, but why do you think you should be in the partners program? Do you feel like you’re entitled to something because of what you do for YouTube? Shouldn’t it be up to YouTube to decide who they want to have in the partners program or not? Isn’t it enough that they provide us with the site itself, and all of the features that are free for all of us to use? Again, please don’t think I have any ill will towards you, i’m just curious to know what the thinking is behind your opinions.

  5. “YouTube has always been about community not commercialization.”

    I completely disagree with you on that one Nalty. I watched YouTube bend over backwards for Partners/Sponsors/Marketing companies, but Average Joe YouTuber?

    Fuggitaboutit!

  6. Hey Matt, I don’t think it’s deserved no, but it’s something I’m interested in, and while I don’t have as many subs as Kevin does, I do have the same or more than some of the other partners of recent. I strive to make sure all of my vids are free from copyrighted materials, I’ve been an active part of the community, and I very rarely use other video sites to upload to, making sure that the audience I do have is directed towards YouTube – which are all positives for them. I would just appreciate them acknowledging that with the inclusion in the partnership program. And if they decide not to, no biggie. I’ll continue to post my videos and have fun with it.

  7. I only dislike the partners program because I’m not in it and have no chance of being in it. lol

    I’m currently on strike… I go on silent non-discussed protests when something goes wrong with youtube. I’m not gunna post another video until Mrs Horney stops trying to send me to a porn site.

  8. at least you can still rip the vid without the ad – but do the partners get a portion of that Simpsons ad money for every click? I hope so, that’s some advertisement.

    Can anyone e-mail me and tell me how this partners deal actually works?

  9. The partners thing is a mystery. It’s initially just rolled out to people that have a lot of subscribers, and we’re not allowed to talk about what we make. But I want to go dig up my old posts because I pointed out this issue ages ago. That advertising on some content selecitvely would create resentment among others. I, for one, was bummed when I wasn’t on it…. especially since it felt arbitrary.

  10. I don’t trust any sort of commerce cloaked in mystery. Would you buy gas at a filling station that refuses to post its per-gallon charge anywhere? Maybe some people are paying $2.50 a gallon while others only have to pay 50 cents. Bad analogy. Would you go to work for a company that refused to tell you how much your salary is going to be or when you’re going to be paid? That’s why I like Revver. Everything’s above board for everyone else to see.

  11. the ad was shiny.

    when the ad started I stopped watching smosh (but I don’t like him anyway), if is was someone I enjoyed watching it would have bothered me.

    After the initial, let’s see what this does, I worked hard and quick to prevent it from happening again, now I have to wait and click on something else to turn it off. Annoying.

    How soon will it be before someone puts an add-on button in Fire Fox to prevent this feature from starting up or links yotube vids to a site that scrape the ad launcher?

    Overall, this is a little better bandwidthwise than pre ad sites like CNN MSNBC or Super Deluxe, but it interrupts the content in the middle. What is the point of that? Is it to affect my subconscious mind to see a movie or buy a product I may or may not want to see or buy in the middle of watching another program? Didn’t anyone teach these fellows never to interrupt someone while they are talking? Manners?

    It’s not a very honorable approach to bombard while forcing me to ignore another piece of pointless information.

    However, in light of everything it was rather fitting that empty headed Homer Simpson roll out the first ad.

    Google do no evil? Why not step up and set a precedent, find an ethical way of doing business and generating revenue? Companies are going Green when it comes to the environment – how about going green when it comes to affecting my mind?

    This ad made me think of that SNL skit where they had so many tickers and ads on the screen you couldn’t see the newscaster anymore. A possible direction?

    I prefer Revver and bliptv’s approach more (ads after content). As a consumer I rather decide instead of being forced or Tricked into buying or using a product.

    Nalts what do you think?
    How do you think this will affect your video views over at youtube?

  12. That’s a video from January 2007 – has the ad been on there all this time? I skimmed through the comments and didn’t see any hater stuff, which I find very surprising. I can only imagine the crap you’re going to get when you start doing this. But don’t worry, us diehard nalts fans will support you the whole way. Me and tripplehelix.

    You know I’m kidding. I kid because I love.

  13. Oh, and Metacafe, too. Metacafe is above board. They show us what their top earners are making. I like that kind of honesty. I can honestly see that I am a financial failure at Metacafe. Hey, that’s the way the cookie crumbles. So I don’t feel exploited at Revver or Metacafe like I do at Youtube.

    Matt. I don’t think (just) I should be a Youtube partner. I think EVERYONE should be. Let the free market rise or fall on a level playing field.

  14. Hey, I just realized how I could become a valuable member of the youtube partners community! My son would be a great advertisement for ritalin! We could even pitch the new patch version, which is screwing me out of 185 bucks a month because insurance won’t cover it!! Man, I need to pitch this to George.

  15. yeah, I don’t get the secrecy either, unless they aren’t reporting them to the IRS?

    Google is a publicly traded company, I think youtube would have to disclose these payments since they are part of google.

    Business wise they don’t get to be different just cause they’re fun.

  16. Hmm, well i just tried the smosh video and one of LisaNova’s that was supposed to have the ad’s on them and i cant see anything (6:45pm East Coast time).

    Tripplehelx: I’ve been uploading in .H264 .MOV for the last week and whilst i have a very entry level cam the quality is astonishing (compared to what it was).

  17. I just saw the ad. You have to go to the “uploaded 6 months ago” Smosh, the one for “Easy Step”. It’s, ironically enough, a spoof of commercials. Hey! How about we have a site for commercials with amateur video embedded IN THE COMMERCIAL!!!!!!!???

  18. The ad easy to miss, Velvet. You have to click on the rolling donut. Once you do, the ad is incredibly intrusive. Weird. Youtube managed to do this in the worst possible way imagineable (except for preroll). They really ARE genuises over there.

  19. Try vume.com,they pay every member for EVERY hit,which is disclosed in their FAQ @ $3/1000 hits,i just received $140 from them for july,and my earnings are increasing every month.Oh,and they accept Photos,videos and audio.They just launched in april,so traffic is fairly low,but on the rise.so you’ll have to do your own advertising for a while,like we had to do when revver was just starting.P.S. i left a link

  20. Guess I won’t be switching my web site player back over to Youtube’s version any time soon then. Blip.tv has overlay ads already as well as pre and post roll ads and I don’t even need to be part of a select few to benefit.

    I can understand that Youtube needs to be sure that they only partner with people creating original content – which, I’m sure is one reason why they haven’t just rolled out ad revenue sharing across their whole site. However, until they relax the partner program requirements those of us with micro-niche (bags on coining that term if you’ve never heard of it!) audiences will never see even 0.1 of cent.

  21. So with a bunch of loyal fans, viewers and like minds how can people come together erect or build a community that can generate a good buzz and also become, somewhat, self-sustaining?

    Maybe there is no place that can outshine google/youtube, but there’s something here worth looking at and supporting, no?

    It’s a pretty big pie.

    Anyone can watch or click an ad, what matters really is who’s pocket the revenue is going into?

    Word of mouth is also pretty powerful.

    What does it take to start a youtube or a revver or a blip or vume?

    Isn’t SW Airline owned by its workers?
    How about the Green Bay Packers?
    Other than individuals are there any networks or platforms run and owned by the people who actually use them? Like a co-op, or am I heading to close to hippy territory?
    ?
    ??
    ???

  22. Not with my attitude, I won’t, TET. I like Blip, too. All my stuff is there. Seems like they have a more intelligent vieweship base there, which puts my stuff at a disadvantage, but relieves me from suffering all the Youtube gamer and copyright thief fools. Oops, sorry. That slipped out.

    Steve. I’m starting to earn on VuMe. Keep up the fight.

  23. OK, it seems to be that if I view the “example” video with internet explorer, I see the ad. Now if I view the same video with Firefox using the Ad-Block Plus extension, the ad does not show up. And I will say this for the folks that made the Ad Block Plus extension, it works great and it’s free, although they do ask for a donation. If you do not want to have your surfing experience invaded by ads, this is a nice tool to use.

    As for the ad, personally I don’t find it that obtrusive. If you go through the 100+ comments over at the YouTube blog, response seems to be overwhelmingly negative. A lot of the “i’m unsubscribing” and the “i’m leaving youtube forever” and of course the “youtube you suck eggs and this is the end of you forever just like i have been saying for the last 14 years hahahahahaha”. I would hope that YouTube will keep a close eye on site traffic while they are testing these features, so they can see how the bulk of the public reacts. They have been known to act to fix things when the community revolts, like when they took away the categories, albeit slowly.

    Revenue sharing will never, yeah i’ll repeat it NEVER, be an option to the general population at YouTube. Sure the partners program may grow and expand over time, but there is way too much opportunity for fraud and cheating, and there are plenty of people that would try and do it too. Cyberspace is a lot like the wild west, and people have a lot less scruples when presented with the guise of anonymity. Not to mention the whole copyright issue, but it becomes a huge liability for YouTube to trust that people won’t post copyrighted content and then try to make money off of said content. No doubt those are legal battles they won’t want to fight.

  24. marquis I agree YT will never share with the public in general – they can’t get the boobs off the front page, not to mention look how long to get rid of blunty’s sock puppet. Hard to believe they have such tough time controlling their front page. Why don’t they hire someone?
    Anyway, seems to me they have more viewers than they can handle
    There’s room for someone to pick up the slack, some one with personality l(

  25. When I picture Youtube in my mind’s eye, I picture a giant mainframe computer room full of whirling magnetic tape drives with one chair way, way, way in the back and that chair is empty. I don’t blame Youtube. Employees cost money.

  26. I liked Nalts better before he was a shill for youtube. You know, when his blogs were long and detailed on many a topic, from revver to video techniques. Yes, he still posts on other topics, albeit short summerized posts, but most of his posts are long winded posts revolving around youtube this or youtube that. Please don’t get me wrong, I sincerely appreciate the things I read here, I just used to appreciate it more.
    Less youtube please.

  27. You hear that self-deprecating Kevin?!
    I think ego Kevin put is hands over his ears and is screaming lalalalalalal
    I don’t chide Kevin for riding the youtube wave, in fact I think we should support him. It’s great to see the nice guy win once in a while πŸ™‚

  28. hey marquis you have plenty of personality! I’ll trade some of my teeth for some of your personality and skylark I love your web site, want to do mine?

  29. How To Block YouTube InVideo Ads:
    The Mozilla browser add-on TubeStop will replace all the video players on the YouTube site with the embedded player, which thus far do not support the in-stream ads.

  30. Nalts you really are awesome, I loved the trash man videos and thank you for pointing out Desiree and Justine, they are hilarious, but I think i have a crush on Desiree now, that girl cracks me up.
    jischinger thank you for the compliment, gives me the motivation to and work on my site again, its been neglected for quite some time unfortunately… no updates, no new videos, im ashamed, i took a new job several months ago in and moved and unfortunately pour my time into my day job… maybe nalts can let us know how he balances so much?

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