YouTube introduces video advertising

YouTube, which has become the most popular online video-sharing company, said on Tuesday it will introduce video brand advertising on its site, a key step toward making the free service pay its way.

The video ads will complement the minimalist text and small graphical online advertising that it already offers in the form of banner ads, promotions and sponsorships.

YouTube, which serves up an average of more than 100 million video showings daily, has been working to find ways to convert its soaring popularity into revenue.

It has nearly one-third of the U.S. Web video audience, according to audience measurement firm Hitwise -- twice that of rival MySpace and three times that of Google Inc..

YouTube said in a statement that its first partner would be Warner Music Group, which will promote Paris Hilton's debut album on the site. It also will be sponsored by Fox Broadcasting Co.'s 'Prison Break.' Fox is a unit of News Corp., which also owns YouTube rival MySpace Videos.

The San Mateo, California-based company specializes in serving up short, typically two-minute, home-made, comic videos created by users. Taking quick breaks to watch videos online has become a popular distraction for viewers with broadband computer connections at work or home.

The Paris Hilton Channel is the first example of a new advertising revenue model YouTube has launched called Brand Channels which will try to integrate advertiser brand names into the YouTube community. Advertisers will be allowed to customize the channels and create subscriptions so viewers are alerted whenever a new video is added to the channel.

Another advertiser option will be the Participatory Video Ad, a user-initiated video advertisement which allows consumers to rate, share, comment and embed advertising content that they find interesting on their own pages.

The company said the new business models were the first of a new range of ad types which will be rolled out over the coming year.

(Reported by Eric Auchard in San Francisco)