A closely guarded secret at video-upload site YouTube is the company's plan to sell advertisements. The strategy is even cloaked in a code name.
Madison Avenue is keeping a close eye on what kind of advertising model the top player in the burgeoning market will adopt. YouTube has successfully attracted a large following by becoming the master of ceremonies for an Internet variety show that offers a stage to homemade-movie makers. To cash in, the company has set its sights squarely on the $12.5 billion online advertising market.
Video is blossoming on the Net as large numbers of consumers, linked to the Web via high-speed connections, search for alternatives to television. Some advertising experts wonder whether YouTube and competitors such as eBaum's World, AddictingClips.com and Break.com can make a living out of presenting amateur videos. The video clips, which can range in length from just a few seconds to 10 minutes, are often wickedly funny but sometimes veer to the macabre, mean-spirited or to the just plain gross.
On most of the upload sites, viewers can witness bloody fistfights, half-dressed teenagers gyrating in their bedrooms, or spectacular car and plane wrecks.
"It's not a proven business model yet," said Jupiter Research analyst David Card. "There will be some advertisers who won't mind sponsoring lots of crappy content cause they want to get in front the kids who go to these sites. But there are lots of advertisers who don't want anything do with it...One thing I can guarantee you is there's not enough advertising dollars to go around."
User-generated video sites have two things going for them, said Gary Stein, director of strategy at Ammo Marketing in San Francisco. First, these sites are attracting a large and hotly sought-after audience: males between the ages of 18 and 34.
"These sites will be totally attractive to advertisers for one reason: numbers," Stein said. "Their audience is big and growing and their demographic are young males bored with cable and broadcast TV and who are spending more time on the Internet."
The upload sites also are banking on video, which is a proven vehicle for delivering ads and one that advertisers understand after a decades-long relationship with TV.
Ads called pre-rolls, usually 15-second commercials that appear prior to the featured video, can generate big fees, Stein said.
Studies show that audiences watch the pre-rolls and that their messages stick with them longer than other ads, Stein said. Karl Heberger, advertising director at eBaum's World, one of the top upload sites, agrees with Stein. But you won't find any pre-roll ads at eBaum's World.com.
Catering to the audience
The reason is eBaum's World executives fear they might alienate many of their 900,000 daily unique visitors if they force them to endure a 15-second spot. In comparison, many TV commercials run a minute long.
"We specialize in short clips for the ADD (attention deficit disorder) generation," Heberger said. "If we ran a commercial in front of that, it wouldn't make sense. We don't want to turn off our users."
Even if they opted for the pre-roll ad, Card says most advertisers wouldn't get too excited. How much message can you convey in 15 seconds? he asks.
Visitors to eBaum's World--a company Heberger said is profitable--will find a mixture of ads, including banners, and some that stay in the user's view as he or she scrolls up and down a page. One movie ad found on the site automatically begins playing a short trailer once a computer cursor moves across it.
Finding the right way to advertise to its audience has San Mateo, Calif.-based YouTube scratching its head.
"That's why we're taking our time," said Julie Supan, YouTube's spokeswoman, referring to why the company has yet to post ads on its site. "The model we bring forward is going to be a new model because this is a new market."
She notes that the site has already proven itself a powerful promotional tool for companies, including digital-tools maker Logitech and rock bands such as the Red Hot Chili Peppers who have seen their commercials or music videos posted on the site.
Regardless of the kind of ad YouTube opts for, it's going to irk some viewers, Stein said.
"It's going to be jarring experience the day they turn the ads on," Stein said. "I question whether they should have included ads from the beginning. Now, you're shifting the proposition after the audience has gotten used to an ad-free site."
And there's no guarantee that an ad won't be matched up with something unseemly or downright offensive.
Most of the sites prohibit pornography or anything that violates the law. Yet, one video featured on eBaum's World Thursday showed a multi-car crash on an icy road. As cars continue to slide into each other, up comes a banner ad for Bridgestone tires.
Is that the kind of content the tire company wants?
Heberger acknowledges that sometimes the video doesn't quite fit the advertiser's message or image.
"The problem is advertisers want it both ways," Heberger said. "They want to be in front of that 18 to 34, but they don't want to be associated with much of what that demographic finds entertaining."
What upload sites will do to draw the more squeamish advertisers is create dedicated areas where the sites can guarantee clean videos, said Stein, adding that such safe zones can't be too clean.
"We'll likely see video sites establish protected areas," Stein said. "That's where you'll find Chevy and Proctor & Gamble. But YouTube can't say we're shutting all the iffy content down because it becomes one more control of the man. You eventually kill the reason for being there."