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Following a trend of other video sites, beginning today Google announced it will sell advertising on YouTube videos to take advantage of the growing popularity of on-line video. The ads will be sold only on clips from select content partners, who will share the revenue in a system GOOG 22 08 2007 Chartsimilar to Google’s AdSense Network. YouTube has revenue-sharing deals with more than 50 partners. Advertisers can target their commercials to specific genres. Google will charge advertisers $20 for every 1,000 times the ads are played. Initial advertisers include Warner Music Group and Twentieth Century Fox film studio. The format involves a semitransparent ad on the bottom 20% of the video that starts 15 seconds after the video begins to play, and disappears up to 10 seconds later if it’s not clicked off. The video itself pauses while the commercial plays. Testing of the format began in June on 200 videos from 20 providers and found that 75% of viewers watched the entire ad. YouTube said they had five-to-10 times the click-through rate of standard ads that appear on Web sites. Researcher ComScore said visitors to Google’s sites watched 1.8 billion clips in May, accounting for 22% of videos viewed in the U.S. Meanwhile, researcher EMarketer said spending on Web video advertising may almost double to $775M this year from $410M in 2006. Google bought YouTube last November for $1.65B.

Sources: Wall Street Journal, Bloomberg, New York Times
Commentary: Google Launches YouTube Video AdsGoogle Sees Bright Future For Television
Stocks/ETFs to watch: GOOG. Competitors: YHOO, MSFT, TWX. ETFs: HHH, FDN

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Source: Google Puts Commercials in YouTube Videos