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YouTube Ads Could Be a Boon, Blip for Google

08/27/07 - 06:27 AM EDT

Vishesh Kumar

Can Google's(GOOG - Cramer's Take - Stockpickr) new YouTube video ads meaningfully pad the search company's bottom line?

That's what Wall Street's been trying to figure out since Google announced last week that its popular video-sharing site will carry discreet ads on some videos.

The most direct, back-of-the envelope calculations seem to suggest that the ads will fall short of moving the needle right away on a company from which analysts expect revenue of nearly $16 billion next year.

But if advertisers take to the new ad format, and if YouTube maintains its impressive growth, video ads could be a major source of revenue for the company a few years out.

And while online video-ad spending initially will likely come out of Internet ad budgets, the category could get a major boost earlier if advertisers begin shifting even a small fraction of their TV ad budgets into online video ads.

Though Google's video ad launch has invited a wide range of speculation about how much the new format can bring in, most estimates have been paltry, considering Google's size.

In a note to clients on Thursday, UBS analyst Ben Schacter estimated that the move could bring Google an additional $120 million. Blog AlleyInsider.com pegged the number at $108 million for the midpoint between its most bearish and bullish scenarios.

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