Download Squad highlights a new experiment on YouTube to embed advertising in its online video footage, using a small text box appearing under the live video box with a link to the advertising video. According to Download Squad a limited number of video clips are being exposed via this method in the YouTube site, with ads not appearing when clips are embedded into other sites. Download Squad sees this as a plus, as the embedder of a clip does not benefit from the ad revenues.

But on the other side of the coin, what if the site DID want to benefit from the ad revenue stream? Sites such as TheNewsRoom allow a viral distributor of their videos to take a piece of the revenues from their pre-roll ads, which they hope would entice users to choose their footage from major video outlets for embedding. But there seems to be some push-back from webloggers and other social media outlets on pre-rolls in embedded content. Embedding is a form of personal endorsement for the core content being inserted: the person choosing the content being embedded doesn't necessarily want to endorse a brand advertiser as well. Enabling the embedder to participate in the revenues seems to mitigate this somewhat, but the magic formula for embedding viral video for profit seems to be elusive.

The YouTube experiment seems to point in one key direction in finding a good balance in embedded video ads: sponsored links. As with Google search results in which AdWords sponsored links exist alongside non-sponsored search results the text bar appearing under the video clip enables a viewer to be exposed to the concept of looking at and ad while looking at the clip in question. The key concept of the ad gets exposed to the viewer without creating an interruption. Presumably Google's AdSense infrastructure could enter this picture and allow sites embedding YouTube content to turn on these sponsored links and to participate in their revenue stream.

This Google/YouTube experiment holds promise, but traditional video advertisers are going to want more out of the equation. And perhaps they can get that - for a price and in specific contexts. But in trying to define a new common-denominator formula for online video ads Google's enormously successful experiment with AdSense and AdWords may point to approaches that will be drawing video advertisers away from interruption-driven advertising and towards a level of engagement that may put their content in front of more highly engaged eyeballs.

Labels: advertising, Trends, video, YouTube