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YouTube to Post Ads on Popular User-Generated Videos

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CNBC.com

Most of the videos YouTube is most famous for -- the wild animal battle at Kruger National Park, the skateboarding bulldog-- haven't been monetized until now. I just broke the news that YouTube is rolling out its partner program to include uploaders of viral hits. YouTube's partner program strikes revenue-sharing deals with the site's regular uploaders of popular content. But many of the site's most popular videos are one-hit-wonders, and now YouTube as well as the uploaders will be able to cash in.

Google's video site aims to identify viral hits as they're on the rise, inserting ads early enough to take advantage of millions of clicks. Here's how it'll work: an algorithm will identify videos that have attracted a lot of views, and whose popularity is growing fast, a sign that they will only become more popular over time. Then the site contacts the uploaders to make sure they own the rights to all the content in the video and if they want YouTube to insert ads onto the video. If they do, YouTube will post the same ads as it does on other partner videos (banner, overlay, etc) and give the same revenue split. YouTube doesn't reveal details, but does say that the uploader gets the "majority" of the revenue.

YouTube's Director of Product Management, Shishir Mehrotra, tells me that the majority of its most popular user-generated videos *will* qualify for ads. The site has just started rolling out ads on some of these very videos. Check out the "Battle of Kruger" video that's been watched 45.5 million times since it was posted two years ago. YouTube has matched this video with ads for Africa Safari Experts as well as an online game. "David After Dentist", which has been seen nearly 28 million times, is now accompanied by ads for dentists. The "Otters holding hands" video, which has been seen nearly 13 million times seems a good fit for the American Apparel pet clothing ads that are now posted next to it.

What about the recent hit video of a wedding party dancing down the aisle? It doesn't qualify for this new program since it's already being monetized by Sony Music , which owns the rights to the Chris Brown song playing in the background.

Ever since Google purchased YouTube back in 2006 for $1.6 billion, naysayers have questioned the investment, with the criticism that advertisers are wary of user-generated content. Mehrotra dismisses these criticisms, pointing to what he says are hundreds of thousands of advertisers who come to YouTube's content network. And these are major players, he tells me that 75 of the top 100 advertisers according to Ad Age advertised on YouTube in the next year.

YouTube provides a lot of free bandwidth and until now has only monetized the professionally-generated content and a tiny percent of the user-generated content. Today's announcement is a significant step towards putting ads on more and more of the videos watched on the site every day.

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