(A JPMorgan Chase (JPM) analyst estimated recently that YouTube will gross around $100 million this year, with the vast majority coming from display ads.) But it will take time, and perhaps more than the company first reckoned. And, in a corollary to the saying at Google that warns "don't bet against the Internet," I wouldn't bet against Google. YouTubers point out that most of their key ad formats-including the "overlay" format, which places an ad over a small portion of a video without interrupting it-have been available only since August. And, like all big online players, Google has invested serious time and dollars (the $3.1 billion DoubleClick deal, for instance) in beefing up its display-ad capabilities.
Of course, Google and YouTube have a massive human sales force. "No one is able to sell display ads well in an automated way," he says. The most successful ad format for Web video sites has been display ads that run near video clips, says Dave Morgan, founder of ad network Tacoda, which placed ads on YouTube before the Google deal. "Can you make more efficient? We think "yes.'" He adds: "If you talked to me" about this in early '08, "I'd have been more anxious. "It takes longer to bring in a YouTube dollar than it does to bring in a search dollar," concedes Tim Armstrong, Google's top U.S. There are high-level concerns inside Google that the excitement around YouTube-which continues to increase its share of the Web video universe-isn't readily translating into sales and ad dollars. Selling to them nearly always requires the participation of an ad agency and calls for more labor-intensive sales methods.
They're also more expensive and still primarily the province of big-name advertisers. Video ads on YouTube, though, do not yet lend themselves to easy automation. (Practically anyone can afford such ads and create them with a few snippets of text you can sell truckloads without a sales force.) Its great ad successes-AdSense, which places text ads across several hundred thousand partner sites, and AdWords, which displays text ads beside search results-are both simple, easily automated, and can scale to just about infinity.
I That's not to say everything's golden at Google, which last year took in $16.6 billion in revenue. Even this far into Google's remarkable run, there's nothing quite like a sunny spring day at the Googleplex to make a print media guy's shoulders slump to make that guy feel like a third-term Democratic senator running for reelection in the fall of 1980, just as the implications of the phrase "The Reagan Revolution" were becoming brutally clear.
In mid-April I spent some time at Google ( GOOG) and YouTube.
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