In October 2007 the online video marketplace was in a state of explosive growth and change. Only a third of the U.S. population reported watching Internet video, but this percentage was expected to dramatically grow[i]. Most consumers were still unwilling to pay for content beyond full-length movies and TV shows[ii]. Experimentation with ad-supported business models was rising and expected to drive broader consumption of Internet video in the coming years. Ad revenues were for the time being still very low, however, many competitors were eager to stake a claim on the market.[iii]
It was still unclear which business models would ultimately prove viable. Google had made a bet that YouTube and Google Video would be a winning combination. While Google had an enviable track record, it had not scored many major successes comparable to its search engine in spite of its massive investment in new product development. Below I underlined some major characteristics of online video advertising market and challenges that YouTube is facing at the moment.
