Breaking news: Somebody thinks the new YouTube ad technology really works!

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You may have heard the argument that YouTube is totally over, meaning either that Google was stupid to spend $1.65 billion on it last year or at that being subsumed by giant Google has doused the raucous YouTube magic. I was first struck by the idea when I read Jeffrey O’Brien’s great piece in Fortune a few weeks ago about the “Paypal mafia,” which featured funny pictures of a bunch of illustrious Paypal alumni dressed up as tough guys. Notably absent from the photos were YouTube founders Chad Hurley and Steve Chen. Explained O’Brien in the article:

Hurley and Chen bowed out after their Google handler objected to the gangster motif.

Totally over, I thought. Then, a few days later, I read this from the inimitable Nick Carr:

When it comes to the bottom line, Google appears to be flailing at the online video business. It’s already abandoned its attempt, through Google Video, to charge for content, and its YouTube ad strategy seems to be going nowhere slowly. The big question that has hung over YouTube since its inception has yet to be answered: “In a two minute video, where the hell do you stick the commercials?” Maybe there is no good answer. Maybe NewTeeVee is just a rerun of OldTeeVee, except even dumber and a whole lot less profitable.

Anyway, I was seriously starting to warm to this idea that YouTube might be a bust. But then I had a drink last night with Mark Wood, chief executive of British TV production company ITN (and former East Germany correspondent for Reuters; he says his Stasi file filled 27 boxes!). ITN started a channel on YouTube a month ago, and is using the new InVideo advertising system that places supposedly context-relevant video ads at the bottom of the screen. And Wood thinks it’s working great. Says he:

The problem we’ve all had up to now is monetizing content on the Web. Google have probably cracked the system. … [InVideo] seems to be a way of really changing the way advertising is applied to video.

One satisfied customer does not a business success make, of course. But I’m definitely holding off on that YouTube-is-over-column for a while.

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