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(Still) Waiting On YouTube To Make Money

BusinessWeek's Jon Fine weighs in on Google's YouTube dilemma. Whereas AdWords and AdSense "are both simple, easily automated, and can scale to just about infinity," Fine points out that ads on YouTube cannot be automated as easily. And while just about anyone can afford to create and run an AdWords campaign without a salesforce, YouTube ads cost more and usually require the use of an ad agency, thus limiting its customer pool to larger advertisers.

Fine says there's now a greater feeling of urgency inside the Googleplex that the online video giant needs to start contributing to the company's bottom line. But Tim Armstrong, Google's top U.S. ad-sales executive, says the company made huge strides at YouTube in the last quarter. "It takes longer to bring in a YouTube dollar than it does to bring in a search dollar," Armstrong says. "Can you make [that process] more efficient? We think 'yes'...we're making nice progress."

The need for automation is a big problem, says Dave Morgan, founder of the ad network Tacoda (now owned by AOL). He points out that display ads are the most successful ad format for video, but these still require a human sales force. Meanwhile, YouTube execs point out that one of their key new ad formats, the overlay-which places ads over a portion of clips without disrupting the video-has been available for less than a year. In the end, Fine finds few answers to his question of whether YouTube can grow to AdSense-like proportions.

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