New York — Faced with unending pressure to generate profit from its huge audience, YouTube the popular online video sharing site and AdWords, both owned by Google, on Wednesday solidified their long-rumored relationship, an arrangement that would allow advertisers promote their commercial clips alongside the search results at the Internet’s most popular video site, the latest step in its drive to grow revenues through advertising.
Now, when YouTube visitors make use of the site’s search box, they will see the ad belonging to the winners of the keyword auction alongside their search results. The ads will be labeled “sponsored videos.”
The unification of the couple is called YouTube Sponsored Videos. The program is designed to enable video creators, from everyday users to major advertisers, to reach the broadest range of consumers with relevant videos.
“YouTube Sponsored Videos is our new advertising program that enables all video creators — from the everyday user to a Fortune 500 advertiser — to reach people who are interested in their content, products, or services, with relevant videos,” explains YouTube product manager Matthew Liu in a blog post.
According to YouTube, which held a press conference at its headquarters, Sponsored Videos lets users promote their videos by bidding on keywords. “Anyone can utilize Sponsored Videos to make sure their videos find a larger audience, whether you are a startup band trying to break out with a new single, a film studio seeking to promote an exciting movie trailer, or even a first-time uploader trying to quickly build a following on the site.”
The system announced Wednesday applies a model that has turned Google Inc., YouTube’s owner, into one of the world’s most profitable companies. It lets Google try a new way to profit from the $1.76 billion it paid to buy YouTube two years ago.
Here is how it functions: First, YouTube users, whether individuals or corporations, decide which of the videos they want to upload that they wish to promote through site search. Then they choose which keywords they want to target. The advertiser can then use automated tools to set daily spending budgets and place bids in an automated online auction, similar to Google’s search programs.
“We are attempting to blend the best of Google with the best of YouTube,” said Liu.
Google, YouTube’s parent company, has developed automated tools that assist users place bids for the keywords in an automated online auction, as well as set spending budgets. When people use keywords in search terms for videos, YouTube will display relevant videos alongside the search results. If you are, say, a Hollywood film studio, maybe you bid on the words “movie trailer.”
We are constantly working to develop the right advertising format for the right content and experience on YouTube. That is why our primary focus with Sponsored Videos is to build a platform consistent with the site’s search and discovery experience. Just as AdWords provides people with relevant, non-obtrusive advertising, we hope that Sponsored Videos will provide useful, engaging content, accessible to advertisers of all kinds.
We think this is a great first step for offering users, partners, and advertisers search marketing solutions on YouTube. Like Google, our philosophy at YouTube is continuous innovation, so we will work to improve Sponsored Videos by listening to your feedback and observing the auction as it takes time to fully develop. We hope that by leveraging much of the technology and insight of the AdWords team, we can make this transition as easy as possible.
Analysts have guessed that it will take YouTube at least two years to start making a meaningful contribution to Google’s revenue even as the popular video site rolls out numerous advertising initiatives.
YouTube has launched several ad formats in the last month as well as e-commerce initiatives, full length television and movie pacts and debut live event Web casting next week.
Although Google could not crunch out YouTube’s revenue numbers, analysts estimate it will bring in $200 million to $250 million this year, compared with the parent’s approximately $20 billion annual revenue.
The new program, at present is available only in the United States, also is expected to appeal to video creators who want to attract a larger audience to clips they have posted on YouTube.
“We know there are a great number of people looking to be discovered or become famous on YouTube,” Liu said.
Investors have voiced concerns about when YouTube, which Google paid $1.65 billion for in 2006, will start to deliver revenue and profits in line with the potential of its huge visitor numbers — more than 330 million worldwide users in August alone, according to comScore.
During an interview in August, Google CEO Eric Schmidt said his company still had not calculated how to implement advertising on YouTube. Google took tentative steps to do so in October, when it allowed members of its YouTube partner program to add e-commerce links inside videos.
And now with the launching of YouTube Sponsored Videos, Google stands poised to capitalize on the dreams of celebrity harbored by millions of its users. “This is a powerful way for users and advertisers to get discovered,” said YouTube co-founder Chad Hurley in a video message. “And anyone will be able to promote and sponsor videos in a relevant and democratic way.”