YouTube rolls out sponsored videos in revenue drive

NEW YORK (Reuters) - YouTube, the popular online video sharing site owned by Google, said on Wednesday it will roll out a new sponsored videos format, the latest step in its drive to grow revenues through advertising.

The sponsored videos program is designed to enable video creators, from everyday users to major advertisers, to reach the broadest range of consumers with relevant videos.

The new program works by allowing an advertiser to decide which video they want to promote then choose keywords or search terms to target. Then the advertiser can use automated tools to set daily spending budgets and place bids in an automated online auction, similar to Google's search programs.

When YouTube users search for videos it will display relevant videos alongside the search results which are labeled as 'sponsored videos'. Similar to Google's search marketing programs advertisers pay on a cost-per-click basis.

YouTube hopes to replicate the success of Google's AdWords text ad format by offering relevant but unobtrusive advertising.

Analysts have said it will take YouTube at least two years to start making a meaningful contribution to Google's revenue even as the popular video site rolls out numerous advertising initiatives.

YouTube has launched several ad formats in the last month as well as e-commerce initiatives, full length television and movie pacts and debut live event Web casting next week.

Although Google does not break out YouTube's revenue numbers, analysts estimate it will bring in $200 million to $250 million this year, compared with the parent's approximately $20 billion annual revenue.

Investors have voiced concerns about when YouTube, which Google paid $1.65 billion for in 2006, will start to deliver revenue and profits in line with the potential of its huge visitor numbers -- more than 330 million worldwide users in August alone, according to comScore.

(Reporting by Yinka Adegoke; Editing by Tim Dobbyn)