Advertisers shun user-generated video

Anyone can become a director or star through video-sharing sites like YouTube, but not everyone can make money.

Although more money is going to online video advertising, relatively little of that is subsidizing user-generated video — the short, often-wacky clips from amateurs. Many advertisers, for now, are staying away for fear their ads could inadvertently appear with clips that have nudity, foul language or perhaps criticism of their brand.

"That's a holdover from the TV days," said Jayant Kadambi, chief executive for YuMe Inc., a video startup that has an ad-distribution deal with YouTube owner Google Inc. "If someone runs a TV show that the general audience doesn't like, the advertiser gets yelled at."

The resistance means missed revenue opportunities for millions of hours of online video views, even as sites scramble to meet demand from the growing number of advertisers dabbling with video ads on the Internet to complement their television campaigns.

Google has been promoting new video formats and nontraditional campaigns to make money off its $1.76 billion purchase of YouTube in 2006. But it has been treading carefully for fear of alienating users and advertisers at the Internet's most popular video-sharing site.

Marketers who wish to advertise on YouTube, for instance, can choose to have ads appear only with video from Warner Music Group Corp. and other major content providers that have deals with Google.

Companies also can choose to advertise with user-generated video through the YouTube Partner Program, which lets amateurs show ads with their clips and share in ad revenues. But amateurs willing to participate must be preapproved, based on criteria such as the user's history of producing popular video and complying with the site's rules.

The key to success ultimately will rest with how well video-sharing sites can separate quality video from the rest and target ads accordingly.

"Those national brands, they treat their brands incredibly cautiously," said Jeremy Allaire, chief executive of video distributor Brightcove Inc. "They historically want to associate their brand with content they view as high-quality, trustworthy and appropriate to the kind of product they are trying to sell."

The comfort of marketers isn't the only hurdle.

Because the quality of user-generated clips varies, users are bound to have less tolerance, especially for television-like ads called prerolls, said Rebecca Paoletti, director of Yahoo's video strategy.

"You really don't know what you are going to get until you see it," she said. "A user-generated (clip) could be 30 seconds or three minutes. You have no idea of the quality. To make a user pay with their time with any type of preroll is risky."

By contrast, she said, a user can expect a certain level of quality from a specific show or sports highlights offered online.

"There's an exchange there," Paoletti said. "You are willing to watch advertising because you know what you're going to get."

Suranga Chandratillake, founder of video search company Blinkx PLC, said user-generated clips have become commodities: If one site makes viewing them difficult, users can easily find similar video elsewhere for free and without ads.

Sites with user-generated content are taking several new tacks.

Last summer, YouTube introduced an "overlay" format that sits at the bottom of the video clip and automatically disappears if the user does not click on it to launch a preroll, movie trailer or other advertisement. YouTube also has allowed advertisers to run contests encouraging user-submitted promotional video.

Brad Greenspan, whose LiveUniverse Inc. company recently bought the video-sharing site Revver, said user-generated sites typically "get the leftovers" — dirt-cheap advertising compared with what professionally produced clips and shows command.

With education and innovation, Greenspan said, "by and large we can close the gap. I don't think it's ever going to consistently match top brands, but we're still talking about a huge move upwards from where it is. Right now it's just ridiculous."