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Aug. 21, 2007 at 8:38pm Eastern by Greg Sterling

YouTube Initiates Monetization Strategy With Transparent Video 'Overlays'

People have been speculating about how YouTube would eventually monetize video streams, as opposed to page views. The answer comes in the form of an innovative approach that involves almost transparent animated flash "overlays" that will appear on selected videos. It's an attempt to balance the competing demands of an unencumbered user experience with the effort to monetize the video streams themselves.

Google conducted research, which supports other empirical data in the market, confirming high rates of abandonment of ads (and accompanying videos) when users are exposed to pre-roll. However, pre-roll has been the "default" strategy among sites seeking to monetize their video traffic. To Google's credit, they're taking a careful and thoughtful approach to monetizing YouTube video streams.

Here's how the new overlay approach works, according to Google:

• 15 seconds into the video, an overlay ad appears on the bottom 20 percent of a video
  
• The overlay animates for up to 10 seconds and is 80 percent transparent
  
• The overlay then closes automatically
  
• A user can replay ad by clicking button

If the flash ad is clicked, the video stream stops, a "picture within picture" window is launched and a full video ad plays (no specified duration). After the user finishes viewing the ad, the window closes and the primary video resumes. Google will be reporting click-throughs to advertisers and the duration the accompanying ad plays.

Instead of simply subjecting users to unwanted pre-roll ads, what this approach does is create a more qualified user for the subsequent video ad, among those who click through on the flash overlays. This offers a combination of branding and, to some degree, direct response to marketers. If the overlay ads are successful you can expect to see them quickly emulated by others.

Google will be rolling the ads out selectively and on a limited basis but more widely over time. YouTube blogs briefly about the new program here, and below is more of what's been sent to the press:

As part of the YouTube Marketing Platform, YouTube is working with select partners to improve the presentation of advertising on their content on our site in a manner that brings our community compelling and creative content, and should increase revenue flows back to artists and content owners.

With this announcement, we are launching YouTube InVideo Ads. This model is the outcome of weeks of testing, resulting in a video overlay ad format that is highly engaging and relevant, yet does not disrupt the user experience. The YouTube community will have greater access to exceptional video content and relevant advertising while content providers, from media companies to users, can now deliver more of their creative content to users while earning revenue. Now, advertisers will have more targeted vehicles to reach their audiences in an innovative and relevant way. Most importantly, all of this will be available on a user-initiated basis only.

YouTube InVideo Ads details:

* YouTube InVideo Ads are animated overlays which appear at the bottom 20% of a video shortly after launching. If interested, users can engage in a deeper interactive experience by clicking on the overlay. This experience can consist of a video advertisement or Flash interactive takeover. The original video is temporarily paused and the user can always restart play by closing the ad. Note that if a user does not take action on the overlay, the ad will close.

* The ads are presented within partner content and targeted by channel: genre, demographic, geography and time of the day.

* YouTube will not place advertisements on all YouTube videos. YouTube is only placing ads on content from select partners.

Examples of YouTube InVideo Ads:

Warner Album Browser running on Warner Music Group video
http://www.youtube.com/watch?v=YcGUKtzBCbA

20th Century Fox's The Simpsons running on Warner Music Group video
http://www.youtube.com/watch?v=T1Lfd8bZS60

New Line Cinema's Hairspray running on Ford Models
http://www.youtube.com/watch?v=ee_rDSvOSnY

BMW 3-Series Convertible running on Killswitch Engage
http://www.youtube.com/watch?v=36-wQVgIISo

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