YouTube's New Groove

Squeezing money out of YouTube has been a grind for Google (Nasdaq: GOOG  ) . Is affiliate marketing the missing ingredient?

It seems Google's going to give it a shot, according to YouTube co-founder Chad Hurley's recent comments at a tech dinner in Palo Alto. "We're integrating links to iTunes and Amazon for DVDs, CDs, and digital downloads," he said. "A lot of our content does drive awareness for music or for TV shows or movies, and a lot of our partners are really just excited to make that connection between the two -- going from promotional, getting people to tune into a TV show or buy a movie ticket -- to that direct response in terms of clicking to buy something."

If you haven't yet noticed links to Apple (Nasdaq: AAPL  ) or Amazon.com (Nasdaq: AMZN  ) on YouTube, you're not alone. Hurley is referring to new features that will help the world's leading video-sharing site diversify its revenue stream beyond its current bread-and-butter brand advertising. This naturally leaves two big questions.

1. Will it work?
That's a tough one. Users surfing through YouTube rarely have their credit cards handy. Watching a free My Chemical Romance music video on the site doesn't mean that the viewer has the interest -- or means -- to buy a CD or concert ticket from the band. Checking out a movie trailer may be a more marketable move to spur a multiplex sale, but too much commercialization on the website may send clip seekers elsewhere, if the ads are overly intrusive.

2. Will YouTube share the wealth?
That's a meatier question than you may realize. Google has been stingy in accepting video creators into its revenue-sharing program. For one thing, it takes a certain amount of video-watching volume to justify splitting the revenue. For another, YouTube has to police its partners to ensure that no one is trying to fraudulently create ad views.

The affiliate advantage
Affiliate marketing licks that last point. Commissionable events only happen when someone actually buys the product, so the system can't be easily gamed. Affiliate networks like Amazon's Associates program and ValueClick's (Nasdaq: VCLK  ) Commission Junction don't have the same kind of fraudulent click activity that Google and Yahoo! (Nasdaq: YHOO  ) regularly have to snuff out in their click-based marketing.

However, opening up the process may find unscrupulous accounts uploading unauthorized music videos and trailers to trigger affiliate sales. That won't work, even if YouTube would be nuts to dismiss the revenue-generating potential of honest accounts uploading original film and music reviews.

If YouTube let unsigned artists tag their videos with commercial CDs and MP3s from similar bands, or allowed aspiring filmmakers to do likewise with related DVDs, that could really open the monetization floodgates for a website that has been surprisingly dry, despite its traffic.

Either way, the ads appear to be coming. Can YouTube addicts cope with the commercialization and product placement?

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Google is a Motley Fool Rule Breakers selection. Amazon.com and Apple are Motley Fool Stock Advisor recommendations. Try any of our Foolish newsletters today, free for 30 days.

Longtime Fool contributor Rick Munarriz wonders whether video will ever kill the marketing star. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


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