But what makes Google’s new "sponsored videos" feature on YouTube even more relevant is today’s news that YouTube searches now represent the second largest search engine in the world according to ComScore, ahead of both Yahoo and Microsoft’s MSN/Live! So there should be ample room for YouTube to generate profits for advertisers and in turn for itself (Silicon Alley Insider estimates that it could add $1B to Google’s bottom line).

However, as I began to lay out yesterday, there are a number of caveats that need to be kept in mind by the internet marketer looking to take advantage of this opportunity:

1) Marketing within Social Media (vs. search ads PPC) is generally tricky due to a deeply rooted differentiation by most people between social and business contexts: People don’t like them mixed, and can react very negatively if they are (read Dan Ariely’s excellent "Predictably Irrational", chapter 4 "The Cost of Social Norms").

2) So if you are going to market in any social context, you need to get the tone and the context just right, else you are not only wasting your ads, you are likely hurting your brand. The backlash may also be much stronger than in other situations, because you will be dealing with a perceived violation of social trust.

Whatever initial offer you make needs to still fit into the "friends" context somehow, or else be so targeted that the prospect truly sees your offer as a form of "friendly service", e.g. if you are offering something that would help with a social task they are about to undertake, like offering flowers at a special price if someone is surmised to be going on a date, etc. (judging from e.g. a Facebook "action" of theirs).

3) While YouTube is overtly the least directly social (compared to say Facebook, etc.) and instead more entertainment oriented, the social aspect of sending/receiving video clip links to/from your friends is still clearly there. So to stay in tune with the viewer/prospect, you still need to get the CONTEXT just right:

If the search keyword (or individual video for that matter) is an entertainment vehicle first-and-foremost, then offer them more (hopefully related) ENTERTAINMENT products, NOT shoes or cars or deodorant. This goes for pre- or post-roll ads as well by the way, which prospects tend to gladly view IF they have something to do with the actual video content requested.

With more educational keywords/videos, there may be more latitude to offer things, though they still need to be related and represent a LOGICAL follow-up, else your sponsored video will get largely ignored/filtered out by the prospect just like most other ads (even though, as I said yesterday, Google appears to be embedding the ads very discretely, so that they don’t scream "ad" vis-a-vis the other video content).

So the formula would be, create videos that are highly relevant to your keywords, while also being disruptive enough to get attention.

In a word, Google is starting a new "sponsored videos" feature on YouTube that will follow their well proven keyword/Pay-per-click (PPC) model, only now with videos instead of the familiar (and mostly ignored) Adsense text ads. This should be a great opportunity for those internet marketers already further along with their video efforts.

It should be pretty cheap to bid on the YouTube keywords at first, due to limited competition on them (the barrier to reasonably well-produced, well-converting video is still high, a lot higher at least than for text/image websites), and the click-through rates should be high because the videos blend right in as just more video content.

Note that the appearance of the still screen shot shown for the video before play will be crucial to attracting extra attention (like a well-done display ad). But in principle, nothing about this form of "ad" will make it so that YouTube viewers will mentally block them out – which usually happens even unconsciously after a short while, because the "ads" are, well, videos, the same thing that the user was looking for in the first place.

But if done right, it can be the equivalent of an advertorial, a marketers dream…

An important caveat applies here: You want to be sure to get the context right, i.e. deliver a video that will be perceived as relevant, or even value-added to the user’s keyword search. Else you will garner exponentially negative brand equity, as users will feel betrayed.

Again, I’d say Google just changed the game today as far as their ability to monetize YouTube is concerned (which was pretty poor so far), but it also should be a great avenue for internet marketers: Instead of wasting time trying to manipulate the YouTube view rankings, or having to "viralize" the videos some other way with a high failure rate (although if you can have that built in, the effect after the initial sponsored promo phase could be multiplied!), you just buy the "in".

Of course, you’ll still have to know what you are doing in terms of direct response marketing to get prospects to convert from the video, and make the numbers work reliably for you.

"they are going to lose the Viacom lawsuit in a really big way. If that happens, not only will there be a massive liability, but it will open the doors to everyone else sitting on the sidelines letting Sumner Redstone do the hard work. YouTube will be torn apart by plaintiffs like piranha[s] going after fresh bloody meat."

Even though I love the piranhas metaphor, I beg to differ on the premise that Viacom is acting in its own best interest in this ongoing saga. I think they are cutting into their own flesh.

(Others with more legal knowledge than me have argued that even from a copyright infringement stand-point, Viacom has at best only a limited leg to stand on, but we’ll see, courts can be… uhm… tricky. Read more on this in the comments to Hank’s post).

Exhibit A: Rupert Murdoch (of News Corp./FOX/WSJ/etc.) said in an interview in late May:

Q: So why didn’t you sue YouTube? Plenty of pirated stuff there. A: All the time. Simpsons are all over it. We had mixed feelings about it, but when it came down to it, we figured it was doing more to promote our shows than it was to hurt them.

(AllThingsD.com via AlleyInsider.com)

Therefore, in my view Viacom (Sumner Redstone) is taking the worst possible route: The recent court subpoena for YouTube’s viewing records is already a PR disaster. What Viacom should have done/be doing is force YouTube/Google into a deal where they get to place ads next to this "appropriated" content, and get a share of the fees plus free advertising for themselves (e.g. in the end frame).

But after you threaten and posture, you lose most leverage that you might have had to politely force a Win-Win. (BTW, I don’t hold Google entirely blameless in this, they could have done more to court the "old media" content providers, and might be monetizing YouTube a lot more efficiently than they have been doing so far. Which is to say, they haven’t.)

Better yet, they (Viacom) should have been the ones uploading the content THEMSELVES on YouTube, with their own link text showing, etc. (rather than create me-too sites that are slow to catch mind-share). If they were even marginally Web-savvy, they would have surfed the YouTube wave themselves, and would now be positioned a lot better than they are.

This way they could have LEVERAGED YouTube for their own purposes, sending people from there to their full-scale episodes. I said 2-3 years ago that I’d be willing to pay $1 for each of my favorite Daily Show episodes, etc. Why did Viacom fail to see that they could have had their own iTunes-like TV content distribution?!?

This copyright infringement thinking is pure scarcity mentality: It is one thing for an unknown author to not want their articles/books/etc. being used verbatim and without attribution somewhere else, but for a well-worn-in BRAND such as Viacom’s shows, that’s simply not the problem. Everybody already knows who created it and where it runs. (This is BTW the reason why YOU MUST BRAND!)

Nurture the Infected?!

Most of the time as a business/author/etc. you have the exact opposite problem: That no one gives a dear about you or your ideas/products. We should all be so lucky as to have our (sufficiently branded) stuff ripped off…

In fact, you WANT your stuff to be saturating every nook and cranny. More power to you.

What you don’t want is to be perceived as anti-consumer, even worse as anti-fan(atic). Grave mistake. They are your best customers, your best evangelists. Working against them is madness.

Someone who goes to all of the trouble to record a TV show, convert it, and upload it in snippets to YouTube, snippets that they themselves CANNOT monetize, is by definition a fanatic.

As Guy Kawasaki would say: You should nurture the infected.

Many big (and small) companies are paying viral marketing consultants big bucks to try and get their ideas/wares to "infect" the public, often unsuccessfully. They are paying to try and find and infect what Malcom Gladwell in "The Tipping Point" called "the few": The connectors and mavens that might push your business over the top. And it’s HARD. Often impossible.

BTW, SiliconAlleyInsider just reported Nielsen Ratings that while the average American watches 120+ hours of TV a month, Web video accounts for less than 3 hours a month. So Viacom should be using YouTube and similar means of free distribution to get a greater share of the 120 hours…

Rather than suing while sucking air.

Best – Alex Schleber

More so because they were veering head-long into serious "Business Mind Hacks" psychology issues related to Branding and Positioning.

In response to Henry Blodget’s focusing on the admittedly titillating details of the current negotiations, while mentioning only in passing the likely pernicious effects of the deal in its currently proposed form on both Yahoo and MSFT, I said this:

Why would Henry say "but that’s a different story"?

That is THE story… forget about the short-term, short-sighted, Wall Street angle… none of it will matter if Q1/2009 shows that Micro-hoo has fallen even further behind Google in search/paid search due to all of the distractions that are sure to ensue if this goes through.

Not to speak of the large-scale incompatibility of the two cultures, the potential losses in user bases for "synergized" services, etc. (especially if MSFT tramples all over everything with their typical "adroitness").

If Henry truly believes that this will be a disaster (and obviously I share his view), wouldn’t that mean that the MSN-spinoff-to-Yahoo-plus-cash option should be seriously brought into view, instead of as an after-thought?

A "friendly deal is best for all involved" ONLY IF it avoids the Micro-hoo "listing super-tanker" trap. More bulk will not solve the issues that MSFT’s and Yahoo’s respective bloated empires helped create.

In MSFT’s case, in my view they would have been so much better off if the company had been split up 8 years ago into 2-3 more agile/ nimble/ aggressive/ focused units. Who knows how well MSN (with different name) might be doing today in the internet space that MSFT despite all of the posturing is only an also-ran in?

And Yahoo’s portal approach was dead when the Web 1.0 bubble burst, they just didn’t know it yet. It goes directly against your basic Ries & Trout "Immutable Laws of Positioning": Don’t dilute the brand!

Ask yourself this question: "What’s a Yahoo?" This is the reason that Yahoo never made it into everyday language the way that Google, Xerox, etc. have.

* End of 1st comment. *

Then someone tried to say that the "as for Yahoo! never becoming a verb, it was an early decision specifically not to push that for fear of diluting the trademark", to which I just had to respond because it represents such a deep misunderstanding of the phenomenon:

Dan, the "verb usage" is not something that is decreed from up high, it is a question of the meme spreading through a language/population. And that only has a chance to work correctly if the new term (e.g. Yahoo) takes a "tip of mind" position for a whole new category. Which if "Yahoo" ever did, was diluted so quickly that it had no chance to stick in this way.

Notice BTW that similarly every new venture Google tries under it’s Google brand tends to merely slog along, because a "Google" is a "search engine". So Google Video as a brand loses out to "YouTube". Focus. Simple.

Of course Google was smart enough to recognize this and buy them. "What’s a YouTube?" has a clear answer in a way that "Google Video" never did.

Yahoo BTW just violated this again by adding video to flickr, which evoked predictable groans from the "photography purist" heavy-user set. Now it’s "a flickr is a photo sharing site plus a sort-of video sharing site, like a mini-YouTube"…

Instead of trying to compete with Google in areas that it has already locked up (and "just google it" is merely one component), MSFT and Yahoo should innovate and create entire new categories of search and/or ad services, instead of saying "we sort of kind of have an Adwords too…"

Problem is, as an even bigger/more bloated juggernaut, the chances of that happening, and even in the event that it does happen, it getting "past committee" through the ever increasing layers of bureaucracy, are slim to none.

* End of 2nd comment. *

It is well worth studying your Ries & Trout on these matters, it’s all laid out clearly and supported by reams of real-world examples for all that wish to see clearly.

Back to more titillation :)

Granted, the negotiations and prospect of either a walk-away or proxy battle by MSFT including "poison pills" can be mesmerizing and mind-boggling to people interested in these kinds of industry developments, or their stock market angles (also note the new Yahoo board proposed by Microsoft, for the event of a proxy battle – this came via TechCrunch).

But none of this has much to do with the most basic questions: Is this deal a good idea? Will it work? As you know, I already placed my bet.