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YouTube debuts online video advertising strategy

By Michele Gershberg Tue Aug 21, 8:44 PM ET

NEW YORK (Reuters) - YouTube is making its biggest push into video advertising on its Internet site, a key strategy by owner Google Inc to capture an even greater share of Web marketing budgets.

Google has tread cautiously since buying YouTube for $1.65 billion last November, keen to make money off the burgeoning use of Internet video, yet wary of turning off viewers with intrusive advertising.

On Wednesday, YouTube will launch a way to link video clips with advertising it says makes sense contextually, with the aim of spurring viewers to seek more information.

Rather than load a commercial to the start or end of a clip, YouTube will introduce an animated overlay across the bottom of its video player screen.

The overlay appears shortly after the beginning of the clip and invites the viewer to click and watch a commercial or trailer on a new screen that opens within the original viewing box. If the viewer has not clicked on the ad, it will disappear within 10 seconds.

"The philosophy at YouTube is pretty much core to what we at Google do generally, which is that all the ads we serve need to provide value to the end user," Eileen Naughton, Google's director of media platforms, told Reuters.

"Our advertising partners are eager to use YouTube as a branding platform," she said, adding the new InVideo format has signed on 50 advertisers for its launch this week.

In one example presented to reporters, a "how to" clip on evening hairstyles from the Ford modeling agency also offered a glimpse of the movie trailer for the film "Hairspray."

The overlay, or "skin," is a strategy already used by major U.S. television networks to promote movies or upcoming programs. But the limits of traditional broadcasting have not allowed viewers to interact with those ads the way YouTube can.

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Media and marketing executives alike have been waiting for Google, the leader in Web search advertising, to make a major move into advertising on YouTube.

With more than 130 million unique monthly visitors, YouTube is competing with Web sites built by the entertainment industry's biggest names and could draw more marketing dollars away from television networks and other channels.

The U.S. market for Web video ads is expected to more than quadruple to $4.3 billion within four years, as users make Web video a regular habit, according to research firm eMarketer.

In YouTube's trials, the format drew more attention than existing Internet banner and display ads, and many more marketers already well-versed in Google's search ad network are expected to come aboard, Naughton said.

The InVideo format will likely be one of several modes of commercial messaging on YouTube.

"In the history of Google, there has never been one 'answer'," she said. "It's not the end-all, but it's a very promising format that we are ready to bring to the market."

The advertising deals are being negotiated by Google's ad sales staff, with the placement of video ads limited to entertainment provided by certain YouTube partners, both professional and amateur directors.

"We're working with select partners ... (including) people who are original content creators who have bubbled up and become popular," said YouTube product manager Shiva Rajaraman. "What we're not doing is throwing this randomly across video on our site."

The company found that 73 percent of Web users who were polled about the advertising said they didn't mind commercial messages as long as the site's entertainment remained free. Some 67 percent said the ads did not interfere with their use of YouTube.