YouTube's (GOOG) Secret Ad Plan Revealed: 'Buzz Targeting'

Remember Google (GOOG) CEO Eric Schmidt’s secret plan, alluded to in a CNBC interview last month, to turn YouTube into a money-minting machine?

YouTube says it’s now ready to talk about part of it: A system called “buzz targeting,” which figures out which videos are about to “go viral”, and lets marketers stick overlay ads on them.

The catch here is that the only videos YouTube includes in the algorithm are produced by “YouTube content partners”–largely professional producers of content from the studios, record labels and TV networks, not the random user-generated content that made YouTube famous, and still does. So this clip of LeBron James jawing with Paul Pierce (and LeBron’s mother), which has been viewed 1.9 million times in the last 24 hours, won’t make the cut — because it’s been submitted by someone named “Odenized“, not TNT or the NBA.

We don’t know how much of YouTube’s traffic is represented by the “YouTube content partners” and YouTube won’t tell us. So while targeting video seems like a no-brainer for YouTube, it doesn’t solve the problem of how YouTube can dominate Web video so extensively but only extract a projected $100 million ad revenue in 2008.

This does, however, seem to be a boon to the music labels, since YouTube’s most popular videos are routinely music videos, including this video, viewed more than 50 million times on YouTube in the past 6 months.

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