• The Wall Street Journal, Wednesday, July 9, 2008 11:45 AM

YouTube will fall short of revenue expectations, generating about $200 million for Google this year, The Wall Street Journal reports in a revealing article about the state of the video-sharing giant. Earlier in the year, Google CEO Eric Schmidt said the company was working on new and innovative ad formats for YouTube, but according to the report, Google is merely planning to start accepting pre and post-roll ads, a format long shunned by the search giant because consumers don't like them. In fact, the Silicon Alley Insider reports that Google recently found that 80% to 90% of video watchers flee instantly the minute they see a pre-roll ad.

Meanwhile, most pages on YouTube are advertising-free. So why, you ask, doesn't Google start pasting AdSense ads all around the site? That's because, as The Journal reports, Google is actually scared to sell ads on 96% of its inventory. "Fearful of fueling allegations that it is profiting from copyright infringement, Google will only sell ads against YouTube clips that have been posted or approved by media companies and other partners -- roughly 4% of the total, says one person familiar with the matter."

The report claims that Google's fears stem from the billion-dollar Viacom suit, which alleges that Google profits from the dissemination of advertising on copyrighted material. According to SAI, this means that "either Google's going to need a legal ruling that gives it the go-ahead to make money on its copyright-violating inventory -- or it's going to have live with diminished expectations for its $1.65 billion business."

Read the whole story at The Wall Street Journal »