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By Greg Sandoval, 22 August 2007 08:20

NEWS

Google is finally rolling out an advertising format for YouTube it hopes could succeed where others have failed: by not being too annoying.

YouTube's mini commercials, which are similar to a model that's been used by TV broadcasters for years and are produced through Flash animation, appear at the bottom of a video, are mostly transparent and disappear after 10 seconds.

Once the ad appears, a user has the option of clicking on it while the video pauses. The viewer is then taken to a "player within the player" where he or she is encouraged to interact with the advertiser's content. When the person clicks out of the ad, the video resumes.

Google announced that it has begun testing the new advertising format for YouTube with a small number of advertisers. The search behemoth is ignoring the long-held belief by marketing gurus that a video-sharing site has only two choices when deciding where to place ads: before or after the video.

The new commercials, which will begin appearing today, are the fulfilment of a promise, analysts say. Google had long said that no ad format would be launched unless the company was sure it wouldn't spoil the viewing experience, as well as offer marketers a chance to get in front of YouTube's 130 million subscribers.

Joe Laszlo, an analyst with JupiterResearch, said: "This is a relatively unobtrusive way to get an ad in front of viewers. This shows a lot of thoughtfulness. To avoid alienating audiences, we have to create overlays and bugs that don't get in the way of the viewer and then allow them to get rid of it if they want."

To Google, which acquired video-sharing giant YouTube last October for $1.65bn, the ad format may be the answer to cashing in on its investment. The experiment, if successful, could mean billions of dollars in advertising revenue to other video sites.

Those trading in user-submitted video have long wrestled with how to advertise to viewers who have demonstrated a reluctance to sit through 15-second commercials for a 30-second snippet.

For more than a year, YouTube teased marketers by saying an ad format was forthcoming. Critics predicted internet viewers had become spoiled, that YouTube fans had grown accustomed to watching ad-free videos at YouTube and would never tolerate them.

But Shashi Seth, YouTube's group product manager, said the company took pains to prevent the ads from annoying the viewer. The ad appears 15 seconds into a video, but vanishes after a 10-second run.

If a person tries to watch a video a second time, the ads won't reappear. Seth said the company has tested the format and is satisfied that Flash-animation ads - tucked discreetly into videos for a brief period - won't upset the apple cart.

According to Seth, the man Google sent over in January to fix YouTube's advertising problems, the tests have so far revealed the new ads produced click-through rates five to 10 times higher than traditional display ads.

He said that 75 per cent of users who clicked on to the overlay ad came back and continued watching the video.

Google said the ads will be inserted into a select inventory of video clips that have been screened for copyright and inappropriate material.

To take advantage of YouTube's new format, marketers must come up with entertaining and engaging new content, said Greg Sterling, an independent marketing analyst.

He said: "They are going to have to come up with material that is creative, intriguing and compelling enough to get them to click on those ads. That's the first step. But once they do click they will then have to engage them with interactive content."

Seth said he was surprised to see how prepared advertisers were to create Flash content. Of the 20 or so companies Google is dealing with during the test, most already have staff who are experienced with Flash. "We found that the advertisers were in tune with this even though the model doesn't exist," he added.

But Laszlo warned there's no guarantee that YouTube's audience will take to the ads. First, the overlays could obscure some of the picture. Then, there's the problem of guaranteeing advertisers that their brands won't appear alongside copyrighted content, violence, sex or other dodgy material.

Greg Sandoval writes for CNET News.com