The Adsense “Video units” will display two kinds of advertising, ads contextual to the site and ads contextual to the video being played. Adsense users will not be able to pick from any YouTube video, but only videos from content providers who have signed an agreement with YouTube. Any revenue earned on the video will be split three ways between the site owner, content creator, and Google itself.
Although Google has previously offered video advertising on Adsense, and YouTube has previously been experimenting with video advertising, the new offering will be the first time Google has blended ads with YouTube content for display on third party affiliated sites.
The natural conclusion is that the move is part of Google’s efforts to get better returns from YouTube following their acquisition of the web’s most popular video sharing site in October 2006 for $1.65 billion. Without being able to test the variety of content being offered by Adsense it’s difficult to know how the new offering will be received, however anything that provides additional revenue options for website and blog owners can’t be a bad thing.
Update: Google has now posted about the program here. Video as below.