YouChoose: YouTube Tests New Ad Schemes

Written by Steve Donohue

Monday, June 15. 2009 at 05:25 PM EDT Post a comment

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In an effort to boost ad revenue, YouTube is beginning to test new ways to deliver advertising to viewers, including giving Web surfers the choice of watching one long pre-roll ad at the beginning of a video, or a few commercials placed throughout a video.

The advertising strategy is similar to one used by YouTube rival Hulu. During some TV series and movies that run on the online video site, it gives viewers the option of watching one minute-long ad at the beginning of a program, or several ads running 15 to 30 seconds apiece.

NBC, which operates Hulu through a joint venture with Fox Broadcasting Co., Walt Disney Co. (NYSE: DIS), and Providence Equity Partners, said in April that it would also begin to allow viewers to choose from various ad formats during programs streamed on NBC.com.

YouTube product manager Phil Farhi announced the advertising tests Monday in a post on YouTube's company blog. "We are constantly testing a wide range of options to find the right advertising format for the right content on YouTube, and we think giving users a say in the process helps our efforts," Farhi wrote.

In the example Farhi posted on YouTube's blog, viewers hoping to watch an episode of '80s sitcom Alf on YouTube [ed. note: Which viewers are these?!?!] are given the choice of watching an 83-second ad from Target or a 34-second ad from Tampax before the program, or four commercial breaks throughout the show.

YouTube spokesman Aaron Zamost said Monday afternoon that the "Promoted Videos" run in various lengths depending upon the advertiser. He said the pre-roll, mid-roll, and post-roll ads tend to run 15 or 30 seconds each.

Zamost said YouTube plans to run the test for a few months during a small percentage of the full-length videos available on YouTube. YouTube has added several full-length TV series to its site in recent months, ranging from ABC's Jimmy Kimmel Live to National Geographic Channel specials and classic TV shows such as MacGyver and Beverly Hills 90210.

YouTube and parent Google (Nasdaq: GOOG) continue to dominate Web video sites in terms of traffic. According to ComScore, Google sites generated 6.8 billion videos viewed in April, with YouTube accounting for more than 99 percent of those views.

But Google and YouTube still haven't begun to generate significant ad revenue from videos. Although Google doesn't detail YouTube revenue and earnings in its financial reports, analysts estimate that YouTube generates anywhere from $90 million to $240 million in annual revenue.