Google essentially has its own TV network now, or at least access to its own network through its deal to sell Google TV Ads on EchoStar's Dish Network. EchoStar feeds 120-odd smaller cable TV networks with programming and advertising. How Google works out its collaboration with EchoStar will give internet marketers valuable insights into how Google will move towards monetizing YouTube. How Google does this will give give both large and small online marketers valuable insight into how they can best tap into the vast potential for online marketing though social media sites such as YouTube, MySpace, FaceBook and del.icio.us etc.
Perhaps Google CEO, Dr. Eric Schmidt, and the folks at Google Research need look no further for a model on how to monetize their potential cash cow, burgeoning social media networking behemoth YouTube, than the business model they are undertaking with EchoStar. Figuring out how to make YouTube, which is experiencing near-exponential growth, generate additional revenue for Google's already burgeoning bottom-line has been targeted as Google's top 2008 priority, as Schmidt confirmed in his April 2nd sit down interview with CNBC's Maria Bartiromo.
With EchoStar, Google is figuring out the metrics and mechanics that will allow them to sell TV ads "based not only on price but on how well quality advertising performs", according to the anlaysis in May 5th's copy of Advertising Age. Lower-quality advertising will essentially be penalized by paying higher prices for the same slots than higher quality advertising as judged by audience response to the ads. Google is working its way through the mechanics of measuring how many viewers watch the ad spot, how many watch it through to its end and how long audience members stay with the ad before skipping forward through EchoStar's video on demand format to resume watching the next segment of the programming they've tuned in for. Using this model for Google's TV Ads "could go a long way toward answering who is responsible for bringing viewers in and who is responsible for retaining viewers" - production companies and networks who bait the hook or advertisers who reel in the catch, according to Advertising Age. The beauty is, that for YouTube, Google already has the basics of measuring click-through rate in a media they cut their teeth on.
Once Google gets the model for pay-as-you-perform ads on EchoStar worked out (and if I were a betting man - and I am, I would venture that is happening before the mechanics of the EchoStar collaboration is fully worked out for pay-as-you-perform commercials), users and advertisers can probably expect a variation on the same model to be rolled out to monetize YouTube for Google. Teenagers are a much more interactive audience with each passing year. They actively search out the medium that provides them with the entertainment they want. Aficionados of YouTube are already clicking on videos of the world's most entertaining commercial "commercials", whether they originate in Europe, Japan or South America.
Every year on Super Bowl Sunday there is almost as much buzz about the newest, most entertaining commercials that will be making their debut on the year's biggest TV-buy as there is about the game. It is Madison Avenue's biggest bonanza of the year, with companies wait-listed to pony up the US$2.5 million for a 30-second ad. Here in Canada, where many U.S. commercials making their Super Bowl-debut are pre-empted by Canadian networks because of the effect of restrictive governmental regulatory protectionism, there is most often disappointment that the best and most entertaining of the U.S. paid commercials are cut and viewers have to wait for these same commercials to make their way to regular network programming. Many never do, at least in Canada.
"The idea of TV Ads is predicated on the notion that TV is becoming more like the internet," Advertising Age analyst Abby Klaassen observes. Immediately prior to this year's Super Bowl telecast, snack food giant Frito Lay stepped up to the plate with an interactive promo where users created the content for their ads and the viewing audience voted the advertising spots generated up or down in order weed out the top five viewer picks. When, not if, Google figures out how to monetize YouTube, expect interactive content where Google inserts its paid ad areas on YouTube. Don't be surprised, however, if it costs more to put up under-performing ads that do not hold audience attention span based on their click-through rates than it does to put up popular ads whose content appeals to YouTube's younger, techno-savvy demographic. Google's work with EchoStar already shows that they are hip that internet users, particularly users of social media sites like YouTube, do not want to be the passive TV audience they once were and will resist overt marketing ploys in favour of ad content that entertains while giving a sales pitch or call to action. However Google monetizes YouTube will give us all valuable feedback on how social media sites can best be utilized to reach this valuable consumer audience. Once pay-as-you-perform is firmly established, it will be a barometer for the tastes of the audience frequenting social media sites.
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