YouTube Dives Into Advertising

YouTube has launched an advertising strategy with online video billboards to give marketers and businesses more than contests and banners to reach consumers.

Branded content channels and "participatory video ads" will allow companies to advertise products and services on the YouTube site.

Warner Bro. Records, unit of Warner Music Group Corp., is the first to use the brand channel to promote Paris Hilton's debut album "Paris" that arrives in stores Tuesday. As of nearly 10:30 a.m. PDT (Aug. 22), Hilton's video had been rated 3,918 times, and commented upon 527 times.

Fox Broadcasting Co.'s "Prison Break," which began its second season this week, sponsors the Paris Hilton Channel. Users can subscribe to the brand channels they like.

The branded content channel is where advertisers can customize their own space on YouTube to attract people with contests and videos. Some channels could operate as television, with advertisers offering programming as a sponsor.

The new concept "participatory video ads" features one daily video ad on the home page that users will judge. People can come to the site to rate the ad, share it with others, write comments, and embed the ad inside their own videos or make the ad a favorite.

YouTube's senior director of marketing Julie Supan said YouTube kept community and advertisers in mind when developing the new advertising strategies. The goal meant finding the balance between traditional online advertising and creative approaches that bring consumers into the process. "These new strategies don't require additional bandwidth, technology or equipment; however, they require creative development from marketers," she said.

"The Pulse participatory video ad ran for four days on the homepage, was uploaded 10 days ago, and has over 900,000 views," Supan said. "It's one of the most viewed, most discussed and favorite video this month on YouTube."

"Paris's participatory video ad was upload a little over 12 hours ago and already has almost 160,000 views, and her Brand Channel has over 600 subscribers," Supan said.

Until now, YouTube's offered advertising in banner ads, promotions, sponsorships, as well as Google- and Yahoo text-based ads.

YouTube has been working on the advertising strategy for months, combining the ability to watch, comment and display ads. "They were smart," said Debra Williamson, senior analyst at eMarketer. "They let their audience grow, so now they are in demand. You don't see them looking for advertisers. The advertisers are calling them."

Companies will spend $29.4 billion in 2010 for online advertising, up from $16.7 billion this year, estimates eMarketer. U.S. online social networks could get $1.9 billion of that in 2010, up from $280 million in 2006, says the market research firm.

The growing number of ads online, sites like YouTube and MySpace Inc. will require better navigation for consumers to find the content. Williamson said today it's nearly impossible unless you catch the video on the home page.

Still, YouTube's business model is seen by some as the future of online video advertising. The company already has lay claim to the No. 1 video and movie destination spot on the Internet, attracting to the site about 11 million unique visitors for the week ending Aug. 6, according to Nielsen//NetRatings.