• by May 24, 2006

Google is throwing its hat into the online video ad ring. The search giant is planning to take the pay-per-click ad model it honed for text ads and use it for online video ads. If it's successful, it could wreak havoc on existing ad models, particularly the TV ad market. The first video ads will appear this week.

Google's video ads appear on Web pages as static screenshots in small TV-screen-like boxes. When a user clicks on the screen, the ad starts running inside the self-contained box, rather than jumping off the page as many video ads do. Google's model appears to give consumers more control over how much or how little they view of the ad. "We are offering a very, very non-intrusive ad product," Gokul Rajaram, product manager for Google AdSense, told Reuters. "Only users who click on the ad see the video." Google's AdSense network generates nearly half of Google's revenue, with most of the rest coming from Google's own sites. Notably, Google won't allow the video ads to appear on its own Web site , which produced 58 percent of its $2.25 billion in revenue during the first three months of this year.

The new "click to play" video ads complement Google's existing line-up of text, static image, banner and flash animation ads that run on the periphery of Web pages of sites that use Google to deliver advertising for them.

"The targeting is more powerful than traditional broadcast TV," Greg Sterling, an industry analyst with Sterling Market Intelligence, told Reuters. Sterling says Google plans to promote the service as a way for advertisers to test TV ads on the Web to determine the best ad for broadcast TV campaigns.

The Internet ad market grew 30 percent in 2005 to $12.5 billion. That represents only 5 percent of the budget that U.S. marketers spend on all media, including newspapers, radio, and TV, according to data from the Internet Advertising Bureau. U.S. ad spending on cable TV alone totaled $18.9 billion last year.