YouTube Ads Could Be a Boon, Blip for Google

Even $120 million would be only about 0.75% of Google's expected 2008 revenue.

But in his best-case scenario, Piper Jaffray analyst Gene Munster sees the company making $1.1 billion over the next year. And while that analysis assumes rates rising to $40-per-thousand views, along with high-ad placement and YouTube growth rates, the view may be closer to correct if advertisers end up taking to the new format. Piper Jaffray makes a market in Google shares.

That's because if advertisers were to shift even 2% of the $81.9 billion that UBS estimates will be spent on television ads to the new video category -- about $1.6 billion -- the rates Google can charge could get a huge boost. UBS makes a market in Google shares.

The $20-per-thousand views Google is initially charging is comparable to rates charged by other high-end display media ads, says Kelly Harris, an account supervisor at ad agency GSD&M, whose clients include carmaker BMW.

But though the ads cost as much as other display ads, their rich video quality allows advertisers to embark on new techniques that are difficult to achieve with other types of advertising.

BMW, for example, is running ads that feature one of its cars -- just as it might on television. But a longer, more intricate campaign features a series of videos meant to be entertaining, which are only later revealed to be BMW ads.