YouTube's Huge Ads Make Big Money

A screengrab of YouTube

NEW YORK ( — While YouTube looks for an answer to monetizing video, it stumbled on something else: how to cash in on its home page.

Google’s behemoth video site started selling its rich-media “masthead” ads back in April. Since then, the ads have become commonplace on the site and a showcase for some of the best online display ads emerging from agencies today.

That shouldn’t surprise anyone given YouTube’s scale. Dominant in video, also happens to be the world’s third-biggest website behind Microsoft’s (now Bing) and Google itself, according to ComScore.

But while other portals similar in size, such as AOL and MSN, have been scaling back ads, or at least rationalizing them, YouTube pretty much lets advertisers have run of the place, with ads that pop out, expand, play video and invite interactivity.

The site feels pretty comfortable doing so because the YouTube visitor is looking to be entertained visually. “Someone going to is looking for something interesting to watch,” said Ari Paparo, the product manager at Google who headed the technology team behind two recent examples from Harley Davidson and Volvo.

Harley Davidson’s campaign allowed users to choose a Harley (with Marisa Miller astride) and send as a postcard to the troops. More than 18,000 were sent in a day. Volvo put a Twitter feed in the first expandable masthead on YouTube.

Google says YouTube’s home page was sold out 90% of the time in the third quarter, which sounds high until you consider Yahoo and other portals have been holding “upfronts” for advertisers to reserve ad space for years.

The good news here is that YouTube is netting six figures each day these ads run. The rate card is $175,000 for the home-page takeover with a commitment for $50,000 in additional spending, but that’s just for an ad on the home page. Rich media costs more, a YouTube spokesman said.

More important for Google, it’s a prime venue for branded display advertising, and a test bed for its DoubleClick rich-media ad-serving technology. Mr. Paparo, a former DoubleClick executive, has headed integration with Google and cites the YouTube home page as an example of what the companies can do together.

The bad news, if there is any, is that with the home page sold out, YouTube has soaked up the easy money. The harder part is selling the actual video, which requires more legwork and hand-holding. But there, too, Google is holding the line against downward pricing pressure. One insider said YouTube is pretty unique in the video industry in that it won’t negotiate down from its ad rate of $15 per video per thousand viewers, even if that means leaving ad dollars on the table.

That probably means YouTube is doing more to keep video ad rates high than anyone else, which could pay dividends down the line.

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