YouTube follows Google’s lead with search advertising effort


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Chad Hurley, co-founder of YouTube, says he always gets the same question: ‘When are you guys going to make money?’

The answer he gave television executives attending Cannes’ Mipcom broadcasting conference last month: ‘I don’t think there’s going to be a silver bullet.’


That’s why Google’s enormously popular video-sharing site keeps loading up on new advertising formats: It’s trying to see what works.

At its San Bruno, Calif., headquarters today, YouTube officially unveiled its latest effort: search advertising. The move tries to take advantage of YouTube’s new status as the No. 2 Web search provider; it recently passed Yahoo and now trails only its corporate parent, Google, in terms of searches conducted.

By running video ads aimed at specific YouTube searches, the site hopes to emulate the success of Google by turning searches into dollars. Google bought YouTube for $1.7 billion two years ago and has been looking for ways ever since to capitalize on its popularity. The search giant needs some help restoring Wall Street’s faith in its growth prospects: Google’s stock is down nearly 7% to around $290 today, the first time it’s fallen below $300 since October 2005.

The new advertising program allows video creators to place bids, via an automated online auction, to get links to their videos alongside certain search results. They are charged every time ...

... a viewer clicks on their sponsored link. It’s similar to Google’s AdWords program, which has generated billions of dollars for the company. YouTube says the approach levels the playing field by making the ads available to individuals and businesses.

Given the tight relationship between Google and YouTube, why did this latest format take so long?

‘In hindsight it seems like very natural transition for YouTube,’ said Matthew Liu, YouTube’s product manager for sponsored videos. ‘It is something we have been working on for a number of months. We wanted to provide the right ad format with the right search experience.’

Different ad formats work for different advertisers, said Shishir Mehrotra, YouTube’s director of product management for advertising.

So, even if there isn’t any silver bullet, will sponsored ads finally help YouTube make money?

‘Google is very excited about this product. It leverages a lot of Google’s core strengths,’ Liu said. ‘We are definitely in the early stages. I wouldn’t say we are quite where we want to be. But we are excited about future iterations.’

-- Jessica Guynn