Posted July 9, 2008 9:43 am by with 11 comments

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It appears that even Google stubs its toes from time to time. While being the model of the new economy company with cool offices, free food and time to be creative there are still some old fashioned problems that are affecting the growth of the internet icon.

The one that is reported on in the Wall Street Journal this morning is none other than sales operations. Let’s back up a tiny bit fist to look at one of the results of an apparently tangles sales system at Google. Ad revenue from YouTube is not happening like projected. In fact the article states simply that worldwide ad revenues are falling short of Google’s expectations and will top out at around $200 million for the year. Not back for the regular man on the street but for Google this is a disappointment.

So why the slow ad sales? I have a personal pet theory. Although there are a lot of folks out there who watch videos on YouTube on a daily basis they are doing it to waste time, ooops I’m sorry, I mean to take a break. Either that or they are people with nothing better to do. Call me old school but I just see YouTube as a bigger drainer of intellectual ability than TV itself. I mean, how many stupid human tricks can you watch in one day? I really don’t’ see people thinking that an ad is a great thing to see when they just want to be diverted from their life for a few minutes. Well, I digress and I will now get back to the point ;-).

A few mentions of things that deterring the ad sales of the sleeping YouTube revenue machine. According to Sean Muzzy , media director of Neo@Ogilvy, “Most advertisers are still testing the waters on YouTube”. Translation: No one really knows if this will work. Combine that doubt with copyright infringement issues and potential litigation and most advertisers will be skittish.

Here’s the one that really is most fascinating. It appears that Google can’t get out of its own way. The sales processes that sit behind actually selling ads on YouTube are cumbersome and inefficient. This also goes across the rest of the organization into the AdWords system as well. It appears as if the wild growth of Google has been at the expense of streamlined sales systems. As a career sales guy, if the systems are hard to maneuver you will have difficulty making the sales you want no matter how good the product is. Sales folks want the path from talking to someone to the effect on their paycheck to be as uncluttered as possible. Besides, sales people are professional complainers so you have to suspect none of this is new to the insiders at Google.

So what are they doing to fix it? Google has undertaken Operation Spaghetti. No typo there. Apparently the sales processes are so tangled that a pile of unruly pasta is the best way to describe the situation. For instance the article addresses some of the issues in talking with Tim Armstrong, Google’s head of advertising and commerce in North America:

Some YouTube advertisers, for example, had to pore over three separate legal contracts. Before Google salespeople around the country could propose certain deals to YouTube advertisers, they first had to get approval to do so from a temporary worker in California. And lacking a fully automated billing system for YouTube, Google staffers had to calculate some bills manually.

These types of problems also plagued the AdWords model back in 2002 so this is not new to Google. What is interesting to note is that the search business model is still inefficient enough to have 24 separate internal systems to help advertisers choose keywords for ad placements.

It appears as if there is progress being made with automation of systems and the ability for sales folks to have the latitude of up to a 10% discount on ads for YouTube without manager approval. Mr. Armstrong claims that this will be cleared up by the end of the third quarter. Sounds pretty ambitious.

There is a bit more to look at here but for right now the implications for marketers are a bit foggy at best. What if YouTube really turns into a great advertising vehicle and it is proven that people will actually pay attention to ads in a way that they may act on them? Lastly, and maybe more importantly,  will Google be able to get out of its own way to benefit?

  • They can’t be good at everything now can they? 24 internal systesm for keyword choice is way past ridiculous though, sort it out Google!

  • I’m sure Google will get this one figured out. There’s too much potential in the whole video streaming sector to not monetize it.

    Top Rated Digital’s last blog post..The Top 10 Digital Cameras Ripped Apart

  • It’s all a game of percentages. They might not be as efficient as they’d like to be, but since they are Google I’m sure they’ll streamline the process and turn it around to Wall Street’s liking.

  • I think yes, they can be good at everything. (Disclosure, I’m a shareholder). They’ll get it figured out. The video monetization has to come around, and in this case, product placement isn’t gonna work. or would it…

    Maybe they can use their advertising connections to offer regular youtubers revenue sharing if they meet product placement requirements…?

    Erik’s last blog post..Generating Content for Multiple Blogs

  • youtube has brought a new form of advertisement.. And that works definitely. Though i have never clicked a single ad on youtube videos till date :mrgreen:

    Cars blog’s last blog post..Sony MEXR1 Car DVD Player Review

  • Agree with Top Rated Digital. Can’t wait to know Google action in this situation.

  • I agree that Google will figure this out and eventually make tons of money with this new form of advertising. All bugs and kinks take some time to get fixed whether they be systemic of administrative and this is no different. They just need to be patient.

  • Yeah, I have to agree with Cars. I’ve never clicked a single ad on youtube. It’s such a great avenue though for potential clicks. I’ve noticed how myspace has been revamped for advertisements too.

  • will see, will see

  • You tube + Google = super success

    Travel Point’s last blog post..The Samba of Brazil

  • Perhaps they need to go for a different approach, after all YouTube is the 3rd most popular site in the world, I sure there is some way they can monetize it.

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