Google is struggling to monetize YouTube and will fall short of revenue projections this year, according to the Wall Street Journal. Tim Armstrong, Google's President North American Advertising and Commerce, told the Journal that 105 problems have been identified with YouTube's advertising process. Meanwhile, 24 different processes were identified for search advertising. Now, "Project Spaghetti" is in full swing to help streamline the processes.
YouTube's monetization problem may not be as severe as reported. Last month at a Triangle Interactive Marketing Association meeting, Google said that YouTube's branded channels come with an agreement for clients to spend $200,000 in advertising the channel on their Content Network. Otherwise the channel is "free." Obviously those aren't YouTube revenues, but it does funnel money elsewhere in Google.
Still the bigger question remains in the ability to monetize social media. In May, eMarketer lowered its projections for social network advertising. While users are open to ads on social networks, many find them irrelevant. Mix in the fact that advertisers are wary of marketing their product next to some of the crazy social media content out there, and you've got yourself a regular conundrum.
YouTube is expected to begin pre-roll and post-roll ads (ads before and after vids) in the third quarter, but don't expect that to go over well with users. Or advertisers. Or even Google in the long run. With one of the core problems being relevant ads, simply adding a new type of ad to the mix doesn't solve the problem.
Plus, pre-roll and post-roll ads are akin to TV ads, where branding is a key focus. But with the economy and Google's own shifting of the ad marketing place with pay-per-click ads, more and more advertisers are looking to direct response methods.
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