Google Grapples With YouTube

Last month, YouTube unveiled what it described as "new advertising concepts," such as specialized channels on the site and specially designed ads on which users can comment. Warner Music's(WMG Quote - Cramer on WMG - Stock Picks) Warner Bros. Records, News Corp.'s (NWS Quote - Cramer on NWS - Stock Picks) Fox and the Weinstein Co. are partaking in these services.

Though more advertisers are going to experiment with YouTube, don't look for any huge shift in spending just yet, even though demand for video advertising is skyrocketing.

Spending on online video is expected to hit $2.3 billion in 2010, about a tenfold increase from $265 million last year, according to data from eMarketer, making it the fastest growing area of Web advertising. Inventory is so tight for online video ads on Yahoo!, MSN and AOL that advertisers sometimes are buying spots on popular sites months ahead of time.

YouTube, which declined to comment for this story, could benefit from the fact that companies may be experiencing difficulty finding spots for their Web commercials on the bigger sites, says Denise Garcia, an analyst with WR Hambrecht, who has buy ratings on Google and Yahoo!.

"YouTube will benefit from the lack of inventory," she says. "There's not a lot of alternatives for video-based advertising."

More and more video content is continuing to pour online. AOL said today that it will offer the exclusive Web premieres of two new NBC TV shows, "Studio 60 on the Sunset Strip" and "Twenty Good Years." Yahoo! recently added business-news videos to its financial news site. MSN also has been adding exclusive features, such as its behind-the-scenes look at the premiere for "The DaVinci Code" movie.

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