Since Google Inc. bought out the free video-sharing site YouTube in 2006, the company behind the world’s most popular search engine has been trying to break even on its US $1.65 billion investment.
This was always going to be a long-term strategy, as Google’s amazingly lucrative business model is based around offering free and valuable services. Gmail, the online atlas Places, and most recently the social media platform Buzz, are all examples of Google products that don’t cost their users a cent.
So charging to watch videos on YouTube was never a possibility that was seriously considered, either by Google or by the web public. Google makes money not by selling products or services, but by selling advertising space on the web pages under its control.
Google AdWords is the search engine giant’s major breadwinner, and Google has successfully integrated this system with YouTube. Advertisers pay to show their video ad as a “Promoted Video” within a regular YouTube clip. Placement targeting can refine this process for a higher advertiser ROI, as ads are automatically matched with videos that contain related content, and so more likely to be shown to people who already have an interest in what is being advertised.
Still, the system is imperfect. A YouTube user watching clips about different dog breeds may not necessarily be a dog owner, so showing that user video ads for dog food or dog cleaning services is wasted on both the site visitor and the paying advertiser.
Google has always claimed to put the experience of its users above the wants of its advertisers, so it’s unsurprising that the search engine has announced its intent to integrate “skippable” ads within its YouTube advertising platform.
So soon, if You Tube site visitors don’t feel that a particular video ad is relevant to them, they don’t have to watch it. However, Google is playing fair by its advertisers too and not charging for ads that are “skipped”.
Google expects that the quality and relevance of ads will improve as a result of its latest initiative, and the accuracy of its ad tareting system will increase. If so, then the move will surely be beneficial to enhancing both You Tube user experiences and advertisers’ return on investment.