• Forbes, Friday, September 29, 2006 11:30 AM

Chad Hurley and Steve Chen, co-founders of YouTube, have resisted the temptation to show ads on the viral video site as long as possible. Somewhat like Google, YouTube's strategy has been to amass traffic and usage (it draws 34 million unique visitors in a month and pumps out over 100 million videos each day) first, and worry about making money later.

Google, of course, executed this plan perfectly--but for YouTube, later is now. But before YouTube can start wooing advertisers, it has to persuade copyright holders, whose properties are ripped off daily, that YouTube is actually a great promotional platform and not a video incarnation of the old Napster. YouTube wants advertising on the site to be participatory and interesting, which is a challenge to advertisers. More than ever, ads are content--and if they're good, people will want to watch them.

"This is the most exciting time you could ever enter marketing; the world has been turned on its ear," says John Hayes, chief marketing officer for American Express, which is in talks to become a YouTube sponsor. "I call this the 'I'll decide, not you' generation." Which places a far greater emphasis on quality creative--something Amex often has in abundance.

For example, one of the most highly rated commercials on YouTube is a two-minute Amex spot filmed by director Wes Anderson. It has been watched by over 300,000 people, and has an average rating of 4.5 out of 5 stars. Agencies should be putting their most clever work on YouTube. They should have their own channels perhaps, because if the ads are funny or interesting, people will watch and clients will be happy. Even old commercials have value--sometimes for nostalgia, and sometimes because people get a kick out of 1980s' hairstyles or actors who got their start doing commercials. These are opportunities on YouTube, which in many ways is a collection of pop-culture history as well as a user-generated video site.

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