YouTube will generate about $200 million of revenue this year,* say two WSJ sources, short of Google's expectations. Chief salesman Tim Armstrong is trying to overhaul YouTube's overly complicated (and expensive) sales process, but the company is now considering much more drastic measures. WSJ:
Google plans to begin accepting "preroll" and "postroll" ads, which will run before and after some YouTube video clips, according to one person familiar with the matter. The plan under consideration, this person says, would give companies that post video clips the option to sell such ads, and share the revenue with Google. YouTube has long forsworn such ads because consumers don't like them. But advertisers consider them highly effective.
This is a big deal: Google's intense dislike of preroll is both aesthetic (they're a clumsy "old media" ad strategy, and Google doesn't like to think of itself that way) and practical (we're told that Google has found that 80% to 90% of video-watchers flee the instant they see one of the ads). So resorting to pre-rolls -- after Eric Schmidt had promised that YouTube had awesome new ad schemes in the works -- is an admission that the Mountain View brain trust is stumped.