When Google acquired YouTube for $1.65bn in October 2006, many expected that the popular video sharing website would eventually fall into a profitable business model.
More than two years later, Google is trying hard as ever to monetize YouTube. While it's come a long way, all indications are that it still has a long way to go.
Despite the friction that still exists between YouTube and content owners, Google has been able to make inroads in its relationships. But a problem still remains: nobody really seems to be making a whole lot of money, relatively-speaking.
In an effort to bolster revenue, TechCrunch is reporting that Google will soon allow all of YouTube's media company content partners to sell their own YouTube advertising.
Currently such a privilege only exists for a select number of companies like CBS.
As TechCrunch's Erick Schonfeld observes:
"Media companies with lots of video tend to have large advertising sales teams that are typically able to command better ad rates than what YouTube can get. The prospect of selling ads against all of their videos on YouTube at those higher ad rates has them salivating, even if they have to share the spoils with YouTube."
I think this is a reasonable move for Google under the circumstances, especially given the economy, and other companies that partner with content providers who find themselves in similar situations would be wise to consider these types of arrangements too.
Yet looking at the decision in conjunction with Google's shuttering of Print Ads, I can't help but wonder if Google's reputation as an online advertising powerhouse isn't being dented just a bit. Has Google decided to allow media companies to sell advertising against their YouTube inventory because it's a win-win or is it doing this because it hasn't been able to achieve satisfactory results selling against this type of inventory?
Despite Google's incredible infrastructure, the costs of running YouTube can't be cheap and I have to believe that in an ideal world, Google would not hesitate to put itself in the position of leverage by selling YouTube inventory for its media partners so successfully that those partners become invaluable to it. Instead, the roles have been reversed and media companies will now have an opportunity to make Google dependent on their ad sales abilities.
Whether that turns out to be a good thing for Google in the long run remains to be seen.