Youtube: Waiting for Adsense for Videos
Posted under Online Economy

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Youtube, the leading video clip sharing service, is creating a lot acquisition rumors with much of the debate centered round its valuation.

youtube

Looking at reach and page view alone, with 10,000m page views a month and double digit growth rate, a billion dollar valuation range, like MySpace's, is not out of the question.

Fred Wilson offers a $150M estimate for revenues with $15 CPMs. But other opinions are much less optimistic.

The debate of Youtube revenues highlights problems with monetizing video clips. Jason Calacanis touts a low value for the likely youtube revenues, with only $20M from junk CPM advertising. Jason's estimates a $2 CPM for Youtube contextual advertising, arguing that the "dorky" video clips with very little segmentation or keyword context will not earn the higher range $15 CPM's for quality full context and full segmentation video content.

Similarly Mike Cuban predicts a a dramatic decline from major problems with copyright owners

Considering the RIAA will sue your grandma or a 12 year old at the drop of a hat, the fact that Youtube is building a traffic juggernaut around copyrighted audio and video without being sued is like.... well Napster at the beginning as the labels were trying to figure out what it meant to them

I think the biggest issue is the difficulty of using the Adsense advertising model on Videos. Given that Google's algorithm works only on text, identifying keywords from video content is ineffective, and hence advertising no longer targets intention or demographics. Categorizing videos manually is not a viable solution, when you have tens of millions of video clips. The only way forward for YouTube is good user tagging.

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