Wednesday, November 12, 2008

YouTube Institutes Google-Like Ad Auctions

YouTube is finding new ways to generate revenue off its site. The last time I visited, I was surprised at how "pure" the experience was, surprising for a company that was bought for billions.

The new revenue model uses auctions like Google's search-word mechanism. When a YouTube user types in a search phrase, sponsored links appear. As in Google, the highest placed link is from the advertiser who bid the most for that phrase. The second highest link bid the second highest amount, and so on. And I am assuming it is a "second-price" auction, with the amount that the high bidder wins being the second highest bid, and so on.

Now I wonder what they will do to make sure that there is no copyrighted material being illegally displayed by any of the advertisers. That will create a revenue link that I think would weaken Google's defense in its copyright infringement case with Viacom.

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