With the promise of new channels and original content, Youtube is testing out different strategies to help generate revenue for the site. The latest strategy sees the company reportedly trying out a new ad model to support its numerous video channels, selling sponsorship instead of TV-style demographics.
Adweek report that the estimated value for the sponsorship - which takes into account display, overlay and pre-roll - would amount to $4 million to $6 million annually, depending on the channel. The pre-roll would also be higher than the industry average, amounting to roughly $20 CPM (Cost per mille).
Targeted marketing has become an important focus for Youtube. For the numerous channels and categories on its site, follow themes like entertainment, science, sport and music. For the sponsorship model, keyword targeting is used instead of demo stats, and they work on a shared-revenue model.
How the revenue is distributed is as follows: Youtube gives an initial grant for production, then splits profits from ad sales with the video creators after that first investment is recouped. The idea is to encourage more people and production companies to start making professional and original content for the site.
By giving the producers funds to develop their own shows, it means that more money is spread across the board, and allows more flexibility for both sides as unless the video is a massive flop, the grant will be recouped.
According to Adweek, Toyota and GM are currently attached to the Moms and Auto categories respectively, while Unilever is on board for its Young Holllywood channel. Youtube believe that it will be the youth market that will play a huge part in this model's success, and see the channels appealing to this demographic.