10/08/08

When Google bought YouTube for $1.65 billion two years ago, many industry analysts were left scratching their heads. YouTube was king of the hill for user-created videos but how would Google make money from the site? This week, Google may have taken baby steps towards addressing that concern.

Music videos on the site will now sport an icon to buy that song from either Apple’s iTunes or Amazon.com. The idea is that if you like a song, you don’t need to leave YouTube to buy it.

Google is counting on new forms of advertising to help it make up for a slower growth of its core text ads business.

The new YouTube program is starting off with a limited number of partners: Only EMI and Universal are participating. The recently released video game Spore from Electronic Arts is also available. YouTube plans to expand the program beyond iTunes and Amazon and to include other merchandise like concert tickets, a Google spokesman said.

Music labels will also be able to put “buy” links next to user-uploaded videos whose images or soundtrack match what the labels are offering. The matching process is via YouTube’s Content ID system which was originally created to help content owners find unauthorized material on the site. The pendulum now seems to have swung the other way with labels embracing user content incorporating their work.

The new YouTube service is long overdue, even Google execs admitted. Earlier this year, Google CEO Eric Schmidt said it had taken longer than expected to find the right advertising models for YouTube. “You Tube is a huge end-user success and we are awaiting the monetization that goes with that, and we believe it will come,” Schmidt said.

More on the YouTube blog