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Google announced today that it will allow the publishers in its AdSense network to have YouTube videos planted on their sites, while sharing revenues for related advertisements (this has been a closed pilot program since May and is now available to anyone).

It specifically involves an additional tab in the AdSense dashboard that lets site publishers choose content providers and categories or add their own keywords to help Google decide what video units are most appropriate their sites (check out Google’s instructional video).

This is analogous to what Google is already doing with text ads throughout the AdSense publisher network, it just takes it to the next step with video content. This is also the next step in the video ad formats it has already begun to test with YouTube ads, which insert a small text ad overlay at the bottom of the video screen, about 10 seconds into the video. These AdSense integrations will also include a more static text ad that sits above the video window (more details in this video).

This takes that monetization opportunity and gives it more scale beyond just YouTube (which has quite a bit of scale on its own) to also have distribution across the sizable AdSense network. Across that network, in various places, ads might be better received or get higher clickthrough rates than on YouTube, where the use case has traditionally been to watch entertaining clips that are free of ads.

So in addition to scalability, this gives Google — in some cases, depending on how well it matches videos to Web sites — more qualified places for video and related advertising to reside. In other words, in terms of distribution this could bring Google quality in addition to quantity.

It’s also an opportunity for Google to monetize this content without tainting the YouTube user experience. Google essentially paid $1.65 billion for YouTube’s name and domain and massive user base, while many of its other assets could be replicated. So tampering with that popularity by over-monetizing a site experience is no doubt a sensitive matter. AdSense distribution on the other hand sidesteps that issue by making these videos (and their accompanying ads) more portable to live in different locations.

This could also have implications for local, if Google carries this monetization opportunity forward to bring YouTube into the AdWords fold, by allowing SMBs to upload video that is placed based on a combination of keyword and geographic targeting. This placement — like text ads — could happen throughout AdSense publisher sites (given today’s development) or in local search results and Google Maps. Lots of possibilities. This could get real interesting, real soon.

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