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Is Google Cutting The 'You' Out of YouTube?

Analysis: Each month, according to Shashi Seth, YouTube group product manager, users watch 3 billion minutes of YouTube's video content.

With its recently launched InVideo ads, animated overlays that appear at the bottom of 20 percent of a video shortly after launching, YouTube seems to have finally figured out a way to convert some of those billions of minutes into dollars and cents.

Seth told internetnews.com the click-through rate on InVideo ads is five to 10 times higher than it is with the traditional banner ads, which have traditionally monetized the site.

Marketers will have some say over who's clicking through, too. They'll be able to target their advertisements by geography, demographic, video genre and time of day.

Even better for Google, there's evidence users won't mind getting targeted. Seth said users like InVideo ads more than alternatives such as pre-roll advertising, which more than 75 percent of users clicked away from during YouTube tests.

All this is good news for Google, but for YouTube lovers, maybe not.

JupiterResearch analyst Emily Riley told internetnews.com that InVideo ads fail to monetize the vast majority of YouTube's user-generated, "long-tail" content.

"Unfortunately, they're starting with just the professionally produced content. So they haven't really cracked the nut of what to do with user-generated video," Riley said.

Riley said it's likely that advertisers don't have much interest in sponsoring low-quality, user-generated content. That reality would render worthless many of those 3 billion video minutes watched.

Google spent $1.65 billion for YouTube last fall and it's been facing a $1 billion copyright suit from Viacom since the spring. Worthless might not be good value for the search giant.

Still, since Google bought YouTube last fall its has touted it as a site built around the long tail of user-generated content. Google even used YouTube's long tail model as a defense against Viacom's copyright lawsuit.

But if InVideo ads take off, why should Google continue to foot the bill for a relatively worthless long tail of user-generated content?

Certainly Seth was eager to talk about YouTube as something more than a long tail model.

"I think there has been a lot of buzz around the long tail on YouTube and I think it's accurate for the most part, but there's also a lot of content being watched by users that comes both from the professionally produced content folks as well as some of our user partners getting pretty professional," Seth said.

But don't worry, Google isn't about to cut the You out of YouTube.

A more likely scenario would be that Google eventually chooses not to monetize the majority of its user-generated content at all.

If Google's "selected partner" list grows large enough and InVideo ads earn enough, Google might even go so far as to remove banner ads from around videos that aren't uploaded by "selected partners."

One benefit of making this move would be that copyright owners would not be able to say Google profits from banner ads surrounding illegally uploaded content.

Meanwhile, the majority of user-generated content would still serve as a way to bring viewers to content from YouTube's "select partners."

Seth confirmed that Google and YouTube are still figuring out how best to monetize the site.

"We're going to experiment with it and find a model that works for our users as well as our advertisers and see what works. Stay tuned."