Report: Google To Launch Conventional “Preroll” Ads On YouTube

Nobody in social media is making the money they think they should be. That would include YouTube if you put the site into the social media bucket. But if you see YouTube instead as the dominant video site online then its revenues, reportedly to reach about $200 million this year, are arguably really lagging.

One of the hallmarks of YouTube has been its user-centric focus to the exclusion of almost all other considerations, including copyright law according to Viacom. But, in an effort to find more revenues, YouTube is apparently abandoning its historical “no-Preroll” policy.

According to the Wall Street Journal: 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.

When “overlay” ads were introduced on YouTube last August it was a thoughtful attempt to balance monetization and user experience considerations. At the time Google had done consumer research that showed apparently high rates of abandonment of ads (and accompanying videos) when users are exposed to preroll.

One could even argue that part of the reason YouTube rose to the top of the video segment was the original absence of advertising, but especially preroll. Google has flirted with and backed away from preroll for YouTube in the past. This apparent change of policy and position can be seen as further evidence of Google’s “maturation” as a company focused on ad revenue growth.

The Wall Street Journal article cited above is lengthy and goes into a range of interesting issues, including challenges in ad sales and display advertising for Google. Indeed, Google bought YouTube in part to diversify into brand and display advertising. But here’s an interesting excerpt from the Journal article:

One complaint from mainstream advertisers is that YouTube — where clips uploaded by users range from raunchy to heartwarming — lacks enough content alongside which they want to run their ads. New Line Cinema, for example, created an ad campaign on YouTube last summer to promote its movie “Hairspray.” The ads performed well, New Line said, but it had a hard time finding enough YouTube videos where it wanted to put the ads.

Assuming the story is correct and we will start seeing pre and/or post-roll advertising on YouTube, the question is how widespread will it become? Many YouTube users will be disappointed by the development, but most will probably accept it.