YouTube has been plagued with inefficiencies in its ad-sales department and Google is apparently ready to abandon its policy of keeping preroll and postroll ads off the video-sharing site.
The news was first reported Tuesday evening by The Wall Street Journal. The newspaper, citing unnamed sources, also said YouTube will generate about $200 million from ad sales this year, short of Google's expectations.
However, the figure is far higher than most of the guesses made in recent weeks by analysts and media pundits. If accurate, it is almost certain to raise questions about what kind of costs YouTube is piling up if it can't turn a profit with that kind of revenue.
Google CEO Eric Schmidt has said several times this year that he isn't satisfied with the money YouTube makes. Those statements have come after Google, which paid $1.6 billion for YouTube in October 2006, has spent nearly two years trying to figure out the ad model for YouTube.
Adding prerolls and postrolls to the Web's No.1 video site would be a signal that Google hasn't found a more novel way of advertising to YouTube's ad-loathing audience--something the company has said it would do. More importantly, the ads could ignite a major user backlash.
YouTube users have continually bucked attempts by the company to make the site more ad friendly. Last year, when YouTube began experimenting with overlays--the little ads that briefly appear at the bottom of the screen of some YouTube videos--I applauded the move as a great idea.
Overlays are old hat for TV broadcasters, so audiences are used to them. They appear on screen for only a few seconds and then disappear. But plenty of YouTube fans hated the ads, saying they were a distraction and intrusive.
Some of the other highlights in the Journal story:
Google has identified 105 problems with YouTube's ad sales.
Advertisers aren't willing to post their ads on many YouTube videos
Because of legal questions, Google is only selling ads against video clips that have been approved by media companies and other partners, which, according to the story, is 4 percent of the total clips on YouTube. Think about the significance of that. Every minute more than 10 hours of video is uploaded to YouTube and only about 20 minutes is worth anything to the company.
YouTube has long been accused of being a warehouse for pirated material and media company, Viacom, filed a $1 billion copyright lawsuit against Google and YouTube. Google argues that the law doesn't hold it responsible for any illegal acts committed by users.