Internet giant Google last week unveiled plans for an ‘incentivisation programme’, by which the company will pay advertisers commission for video ads on its video sites, which includes the popular YouTube channel. The company aims to boost ad revenues via these sites.

Google paid $1.65bn for YouTube in October 2006, but the site is yet to make a profit for its new owner despite impressive traffic rates. According to Internet market watcher comScore, more than 27.4 million UK surfers – 78 per cent of the total UK Web audience – viewed more than three billion videos online in June 2008 alone.

The Trouble with YouTube

So why hasn’t YouTube delivered as good a return as Google may have originally anticipated? According to Sean McPheat of MTD Sales Training, when Google bought YouTube back in October 2006 it bought potential that required monitising.

“[Google] knew it had just bought a ton of traffic and possibly the future of viral marketing and advertising on the Internet but it's been a bit of a white elephant in terms of generating ad revenue through adsense and other means,” he said.

Martin Pavey, Digital Media Director for media logistics specialist IMD, argues that despite video advertising being extremely ‘sexy and vibrant’, YouTube’s format does not suit growing forms of advertising, such as pre-roll video.

“The problem YouTube has traditionally faced is two-fold. Advertisers have been nervous of advertising around user-generated content and in-stream or pre-roll video ads don’t suit the short-form content YouTube does so well,” he said.

Future Format

So what forms of video advertising are likely to succeed in capturing audiences’ attention on YouTube and other video-centric sites? While many believe that video will become the de facto standard of advertising on the web, marketers are still debating which formats are most palatable to consumers.

“One of the key stumbling blocks to date has been that online video advertising has been positioned in such a way as to really pose a barrier to the online consumer experience,” argued Jed Murphy, digital director at marketing firm Carlson Marketing. “Do I really want to wait 90 seconds watching a pre-rolled ad before I get to the content I originally came to see?  And what do I think about the brand that puts that barrier in my way?”

With consumers spending increasing amounts of time online rather than watching TV video advertising is likely to contain a social media element in the future, according to MTD’s McPheat, allowing surfers to vote on a particular ad, product or offer.

“There will be no hiding place for the advertisers. The stakes will be much higher,” he told NMK. “You'll probably have options such as ‘send me more info’ and ‘buy now’, so it will become a more interactive and real time experience that digital TV has simply failed to deliver.”

Made to Measure

Question marks remain over how to measure the effectiveness of video campaigns on the Web. It is fairly straightforward to demonstrate and log when a digital display advert has been served, but online video - which is delivered in a linear format with a beginning, middle and end - makes it tricky for marketers to know when a video has been watched in its entirety.

For Tony Samios, Chief Operating Officer of Steak Group, a digital agency, Google’s research into how consumers respond to video advertising will be critical to the industry’s success.

“If anyone has the ability to show how video can be monetised and the impact it has on consumer buying patterns, it is Google,” he said. “When it comes to online video conventional 30-second TV adverts are just not going to cut it. The viewer experience is different, even if the media format is similar. Expect shorter ads, and ones that enhance user experience by introducing them to new products or other users with common likes or dislikes, to prove most successful.”