Searching for Profit: YouTube Launches New Video Ads

Google's (GOOG) YouTube is harnessing Google's search technology and the power of its video audience, launching new video ads tied to search results. When you go to YouTube to search for a certain video, these "YouTube Sponsored Videos" will pop up next to your search results, the ads related to your search terms. Building on Google's successful search ad model, advertisers bid on these ads and can create the ads themselves through a self-service website.

YouTube has unrivaled video audience, and the search traffic on YouTube itself makes it one of the Web's largest search engines. But until now YouTube's ads have mostly been graphic ads. Last year the company launched ads that overlay the bottom third of video, appearing and disappearing through the clip.

One big challenge to monetizing YouTube's audience is the fact that so much of the site's content is consumer-generated, and therefore unpredictable, so advertisers don't want to associate themselves with it. It seems to me that this new strategy would allow advertisers to worry less about what's in those videos, since their ads show up with the search results. The primary strategy that gives advertisers confidence is YouTube's push to get professionally-created video on the site.

Earlier this week I blogged about Hulu's (co-owned by CNBC's parent NBC Universal (GE)) and News Corp (NWS) growing online video audience and how YouTube has been responding. There's no question—people are watching more and more content online. Now we'll see if those eyeballs can really translate into ad dollars.