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Jul 9, 2008

NEWS: YouTube Ad Push Hits Snags

YouTube Ad Push Hits Snags

Google faces challenges in wringing ad revenue from YouTube. Although users of the video-sharing site view clips more than one billion times on most days, the site hasn't been as popular with big corporate advertisers...

Google: We Can't Figure Out How To Make Money On Web Video, Either

youtube pogo.jpg YouTube will generate about $200 million of revenue this year,* say two WSJ sources, short of Google's expectations. Chief salesman Tim Armstrong is trying to overhaul YouTube's overly complicated (and expensive) sales process, but the company is now considering much more drastic measures. WSJ:

Google plans to begin accepting "preroll" and "postroll" ads, which will run before and after some YouTube video clips, according to one person familiar with the matter. The plan under consideration, this person says, would give companies that post video clips the option to sell such ads, and share the revenue with Google. YouTube has long forsworn such ads because consumers don't like them. But advertisers consider them highly effective.

This is a big deal: Google's intense dislike of preroll is both aesthetic (they're a clumsy "old media" ad strategy, and Google doesn't like to think of itself that way) and practical (we're told that Google has found that 80% to 90% of video-watchers flee the instant they see one of the ads). So resorting to pre-rolls -- after Eric Schmidt had promised that YouTube had awesome new ad schemes in the works -- is an admission that the Mountain View brain trust is stumped.

Of course, one other obvious solution to YouTube's sales woes would be to simply start advertising on YouTube pages, period. Nearly any page you see on the site today is ad-free. But Google is showing a billion clips a day. Why not simply start loading some of those pages with AdSense units?

Because of the other big admission in the WSJ story -- Google is afraid to sell ads on 96% of its inventory:

Fearful of fueling allegations that it is profiting from copyright infringement, Google will only sell ads against YouTube clips that have been posted or approved by media companies and other partners -- roughly 4% of the total, says one person familiar with the matter.

The story ascribes Google's fears to the billion-dollar Viacom suit, but we think that's not fair: Even if Philippe Dauman ends up settling with Google, it's not going to resolve the copyright cloud hovering over YouTube. So either Google's going to need a legal ruling that gives it the go-ahead to make money on its copyright-violating inventory -- or it's going to have live with diminished expectations for its $1.65 billion business.

Video Site Mevio, Nee PodShow, Takes A $15 Million Series C

In 2004, when Ron Bloom and former MTV VJ Adam Curry, founded Podshow, the company seemed a plausible contender for next-big-thing status. But the podcasting industry never took off, and a few months after the two men started their company, a couple of ex-PayPal employees founded YouTube.

Four years later, Podshow has a new name -- Mevio -- and a new focus -- syndicating original video across the Web. And now it has more cash: It has raised a $15 million Series C led by Crosslink Capital and joined by Kleiner Perkins Caufield & Byers, Sequoia Capital, Sherpalo Ventures and DAG Ventures. All are returning investors.

The new round means Mevio/Podshow has raised a total of $38 million, which they argue is fairly modest considering the company's years in business and the cash raised by some of its online video competitors (see, for instance, Veoh and its $70 million). The site had 9 million uniques in May, according to comScore.

Mevio's model is buying cheap, original video, selling advertising and sponsorships, and syndicating across the Web. The bulk of the new money will be used to create and acquire new (advertiser-friendly) content.

Bloom says the company is building out channels with video and editorial content built around technology, men's and women's interest, and general entertainment. The company also creates branded video for advertisers like Coke, Anheuser Busch, HP, etc. Videos on the site are showing pre-roll ads for ABC Family and Snickers. Bloom says Mevio sells advertising for Web shows at a $15-$50 CPM. He says he expects Mevio to turn profitable in Q4.

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