Google embeds YouTube videos in AdSense

Google is testing a version of AdSense that includes YouTube video ads, hinting at the next step in the search giant’s efforts to monetise the $1.65bn video network.

A new Flash-based 300×250 AdSense unit includes text links as well as a 250×200 embedded YouTube video. The test ad is “Gmail Theatre” – a low-budget video spot that is hosted on YouTube and trails Google’s own email service, which dropped its invite-only barrier last month.

The unit was developed by social networking site widget maker LabPixies.

Gartner Media research director Andrew Frank said the move casts YouTube’s value to Google in a new light and portends a new wave of video advertising.

“It brings the secret sauce of YouTube – the ease of video uploading and embedding – to the advertising market, potentially putting the power of video within reach of the vast AdSense small-advertiser audience,” Frank wrote.

“It also brings Google’s secret sauce – its AdWords-based contextual targeting engine – to bear more directly on the placement of video ads, by combining them with text in the same unit. “

One side effect at this stage, however, is that the YouTube page hosting the original video displays to users the number of clickthroughs from the ad widget.

In December, Google began testing ads inserted into some Google Video clips.