It took nearly a year of development, copyright-protection lawsuits, and a sullying of the "do no evil" mantra, but Google (NASDAQ:GOOG) is finally installing software tools to keep pirated material off its insanely popular YouTube video-sharing site.

The new tool, called YouTube Video Identification, sniffs out content that belongs to a third party. Google still needs the cooperation of the copyright owner to identify the owned property, but it's a much better solution than the site's original paper-thin layer of protection. In the past, broadcasters such as Viacom (NYSE:VIA) had to report every single incident. And it was pointless, because issuing a takedown notice on one clip didn't stop another YouTube registered user from putting the same thing right back up.

It's about time Google took the problem seriously. Viacom's $1 billion lawsuit against YouTube made for some sobering headlines earlier this year, but it also sullied Google's reputation as the "do no evil" company.

Naturally, Google isn't exactly jockeying for sainthood. It's also taken some lumps from book publishers, owners of trademarked keywords, and even Microsoft's (NASDAQ:MSFT) human resources department. And assaults on your good name come with the territory when you're on top of the search-engine hill. However, just as China's (NASDAQ:BIDU) found vocal and litigious critics in the music industry when its site was overrun by users fishing for free MP3 song files, Google is stepping up to acknowledge that watching over the world's busiest video-sharing website makes it susceptible to folks who trample over intellectual property.

The offenders may not realize the gravity of the situation. When a young user uploads a 30-second clip from Family Guy, he may not be fully aware of the copyright implications. He's just professing his admiration for the show and serving as an unofficial ambassador in virally spreading the humor. YouTube allows only select partners to post clips that run longer than 10 minutes, so it's not as if entire episodes can even be viewed -- but still, even a brief clip is piracy. Let's hope that YouTube Video Identification will make that clear.

Broadcasters, choose thy fate
What I find particularly compelling here is that Google is finding a way to spin even this model-testing challenge into a moneymaker.

"Copyright holders can choose what they want done with their videos: whether to block, promote, or even -- if a copyright holder chooses to partner with us -- create revenue from them, with minimal friction. YouTube Video ID will help carry out that choice," reads the beta test explanation.

In other words, a YouTube partner such as CBS (NYSE:CBS) can agree to keep unauthorized uploads up on the site, and then profit through revenue sharing tied to advertising on that particular clip.

This is an attractive proposition to content creators. After all, YouTube isn't just the video site with the heartiest traffic. Parent company Google just happens to generate the greatest gobs of online-advertising money on the planet.

Video Units need a jolt
YouTube would also love to build up its partner base, especially those that can contribute to its new Video Units format. Google rolled out this format to its growing base of AdSense publishers last week.

AdSense publishers have been populating the Web with "Ads by Google" over the years. In doing so, they've been riding Google's ad-savvy coattails in a win-win-win scenario. Advertisers win, because they can generate leads outside Google's owned sites. Publishers win, because they can monetize their websites with perfectly targeted ads that they would be unlikely to land on their own. And Google wins, because this approach offers a profitable way to clear excess ad inventory.

Video Units was supposed to raise the stakes. Publishers can now embed a code on their websites that will populate a page with a customized YouTube player, letting people screen ad-anchored clips from revenue-sharing content creators. The problem? As deep as Google's ad inventory is, its video vault is bare. There are roughly 125 content-creating participants for the Video Units platform. Most of them are amateur comedy troupes and popular video bloggers. Save for perhaps Gemstar's (NASDAQ:GMST) TV Guide, the big-name network partners just aren't there yet. YouTube's slow rollout of its partner program is also hurting. The company didn't open it up until May, and either the approval process is going slow, or the pool of applicants to the program isn't all that deep.

That needs to change. Video Units will fail if publishers get frustrated over distracting clips that are poorly targeted. One can argue that YouTube has time on its side as the top dog, yet nimbler players such as Blinkx have raised the stakes with its AdHoc advertising platform that builds ads around video clips from most websites, YouTube included.

So the urgency is there. Google has a financial incentive to excel at doing the right thing.

A ride through the YouTube revenue-sharing museum:

  • Google launched its revenue-sharing platform in May.
  • And it announced its intention back in January.
  • What better way to keep its top content creators such as Lonelygirl15 happy?

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.