Google Takes Over the Free World

You may not have seen ads that Google is running on your YouTube screen, but chances are, you will soon. Google Inc., which recently acquired YouTube, started testing overlay advertisements this week. The ads will appear after a 15 second interval across the bottom fifth of the video screen as you watch the clip. The ad space, which is partially transparent so it does not completely obstruct the view of the video showing underneath it, disappears after being displayed for 10 seconds.

Reaction from YouTube users is mixed. YouTube has been providing a service that users tend to think of as free, but it is not, and never has been, free of advertising. This is simply more blatant because it sits on the screen along with the video you are watching.

Since acquiring YouTube, Google has sought an alternative to the standard ad format for web videos, that is advertising at the beginning or advertising at the end of a clip. The company selected this ad format as the least intrusive to the viewer. In-video ads tested better than pre-rolls - commercials tacked on to the beginning of the clip - according to Google. When a viewer clicks on an ad, the clip itself pauses until the viewer returns to it.

The new ad format will seem familiar at least. It mimics what we see on television, secondary events which cover the bottom fifth of the television screen promoting other shows during the one you are watching. That will likely make the introduction of the new ad format a lot easier to accept for most users. And on second viewing of the same clip, the ad won't appear again.

YouTube is taking care not to unnecessarily alienate its 130 million subscribers, at least not right away. The ads can currently only be viewed on a limited number of content-appropriate clips, and currently the advertisements only represent a select handful of elite advertisers.

The company has to walk a fine line with them as well. Because so much of YouTube's content is user generated, even clips that are free of copyright violations could still be questionable content, inappropriate for or unacceptable to certain advertisers to suddenly find their brand names associated with it. The company will have to find a way to guarantee to advertisers that ads will only run on completely content-appropriate videos.

During the test launch, YouTube identified a select group of content owners who were willing to host the ads on their videos. Google announced that it will share ad revenue with these partners. Google will charge advertisers for every 1,000 times the ad appears, and has tantalizingly offered a cut of that revenue to content owners who want to cash in. Though to this point, there's no guarantee that the offer to host advertising will be extended to just anyone.

In the short term, Google has to gauge reaction from YouTube's hardcore fans, but more importantly, the company has to determined whether the model can be profitable, for itself and for its advertisers. Preliminary results, according to Google, suggest that the overlays are in fact generating a higher click-thru percentage than traditional advertising. But how much of that is the novelty of the format is unknown. And how quickly will YouTube users become blind to that form of advertising if it starts showing up in every single video? As any good internet marketer knows, click-thrus do not equal sales conversions, something else that Google has to track in order to keep its advertisers invested in the experiment.

No matter how the YouTube fandom reacts, the new ads are hardly the end of the world. If anything, users need to be prepared for a much wider launch of the ad format coming soon. So far, Google has said it will stay away from ads on the iPhone or AppleTV, and the YouTube ads currently only appear to users in the United States. But Google has to justify its $1.65 billion investment in YouTube, and has made it clear that some form of advertising on its videos was the inevitable result. If the last five years have proven anything, where there is a market, Google ads are sure to follow.