Google has confirmed that it is testing an ad program for its video service.
Google will launch a public test to show display and video ads on Google Video, another step in the search giant’s slow exploration of graphical ads on its own services, according to sources familiar with the plans.
Under the limited test, a small number of creators of Google Video’s premium content are running streaming ads at the end of videos. In addition, text advertising and the advertiser’s logo are shown above the video player. Clicking on either takes the viewer to the advertiser’s website.
Google plans to announce it will stream for free some premium videos on Google Video–which are normally fee-based–and accompany them with a banner-like ad and a video ad.
The banner-like ad will be displayed for the duration of the video on the Google Video player interface, while the video ad will be shown after the clip ends, sources said.
Premium content is normally available for a fee. Content available under the pilot program are ad-supported. Amateur video would continue to be free of charge and ad-free, a company spokeswoman said.
Experimental Phase
Google began offering for-pay video content in January. In Google’s new test system, the built-in video player will feature a banner ad displayed for the duration of the video, with a 15- to 30-second commercial presented at the end of the clip.
When the service moves out of the test phase, the ads and the videos will not be matched at random. Instead, advertisers will choose the videos they want to sponsor. In this manner, advertisers will avoid having their brand associated with clips containing potentially objectionable material.
The Google Video test may be short, running for only a week, and the ads will be attached to videos from about eight providers. The videos will be from professionals, not amateurs. During the testing phase, only five advertisers who are paying to participate, including Burger King, Pepsi, and Netflix, will have their ads placed in some 2,000 videos, such as "The Charlie Rose Show," "Felix the Cat," and a selection of movies.
After the test, Google is likely to continue revising and refining how it plans to display graphical and video ads on Google Video, sources said.
Google and other sites like YouTube.com and Yahoo are in an experimental phase, trying to figure out what is the right kind of commercial model for video on the Internet, said Andrew Frank, an analyst at Gartner.
Google’s move to offer ad-supported video comes on the heels of several other Internet companies, including Yahoo, Microsoft, and AOL, rolling out their own ad-supported video content.
Why Ads?
The motivation behind the test is likely two-fold. Google is probably responding to advertiser interest and feedback. It may also be testing ways to attract more users to Google Video, by making some fee-based videos available to all visitors. Currently, Google Video clips are either free or fee-based. Until now, video clips have not been supported by ads.
Until this point, the videos, which can be found at video.google.com, have ranged in price from 99 cents to $14.99. Only a select set of these premium videos will be supported by advertising and available for free. User-submitted videos will continue to be available without commercials.
"We are always looking for ways to show targeted and engaging advertising to users and we think that Google Video is a natural extension of this ongoing effort," the spokeswoman said in an email.
Google draws a major portion of its revenue from advertising tied to its popular search engine.
But video is growing in popularity among advertisers as broadband use increases. More than half of the online population in the United States has watched video on the web; and by 2010, 78 percent of the projected 88 million online US households are expected to have high-speed connections, according to research firms.
Reaction
Guzman financial analyst Philip Remek, who is unfamiliar with the Google Video test, was not surprised to hear about the plans.
They are really trying to take on Yahoo here with a multiple-platform approach to online advertising, especially for big ad clients with brand names to promote," Remek said. "I expect them to make a push to [graphical] advertising. It is part of their strategy."
Google has been wise to keep graphical ads out of its main Google.com search result pages, where the contextually-generated text ads are the most appropriate format, Remek said. However, the company’s Web portal-like services, such as Google Video, Google Finance, Gmail and Google News, could be good places to run graphical ads, he said.
Rival Yahoo has a much more balanced ad-revenue mix that includes pay-per-click text ads, banner ads, classified listings and rich media ads, among other things. A big concern about Google’s overwhelming reliance on pay-per-click ads is click fraud. Some experts estimate that as many as 20 percent of the clicks on these text ads may be made maliciously, without any intent to do business with the advertiser.
Google, whose revenue comes almost entirely from pay-per-click text ads, is under pressure to diversify its advertising mix and has indicated an intention to expand the scope of the ad formats it offers its advertisers. The company cited its interest in exploring display and multimedia ads as a reason for extending its partnership with AOL at the end of last year.
Google did not respond to several calls seeking comment.