Peter Kafka of All Things Digital has a post well worth your time about whether YouTube will finally bring in a profit for Google in 2010. He points to recent predictions by Barclays analyst Douglas Anmuth that YouTube will see revenue jump 55 percent, to $700 million, in 2010, and that it will “start contributing positively” to the Google’s earnings. Anmuth writes:

Perhaps the main take-away for Google’s display business is that in 2010 we believe YouTube will start contributing positively to EPS. An improving advertising environment certainly helps, but with YouTube monetizing more than 1 billion video views every week, and with strong sell-out rates on its home-page from larger advertisers–we note 90% of the top 50 Ad Age have advertised on YouTube–we believe the site can profitably take share of the branded display & video market. We project YouTube to generate $700 million in revenue in 2010, up 55% Y/Y. Usage continues to grow. In November the total number of YouTube’s videos viewed grew 139% to 12.2 billion in November and unique visitors grew 32% Y/Y to 129 million. As a comparison, Hulu, the second most popular video site by videos viewed according to comScore, recording 923 million videos viewed.

I agree that YouTube seems poised to grow its ad revenue in 2010, and I also agree with the market dynamics that Anmuth points out. However, 55% strikes me as an aggressive target. Some of the forces working in YouTube’s favor will be mitigated by headwinds from negative factors. Here’s a list of pros and cons the company will face in 2010:

PROS

• The site is adding more and more premium content, which of course is more monetizable than the user generated content (UGC) that made the site into the giant that it is.
• Usage rates keep growing, which I continue to be amazed by. Its dominance in the video space remains essentially unchallenged, despite Hulu’s strenghts as an episodic TV specialist.
• YouTube is getting smarter about the way it monetizes videos — more ad formats, a better overall presentation.

CONS:

• As hard as it tries to become a premium content portal, YouTube can’t shake the perception that it’s a UGC site. Even in the best of cases, it will only be able to monetize a small portion of its video inventory this year.
• The space will get more crowded as Hulu continues to spread its wings and other sites (i.e., Netflix) also gain traction.
• The spread of Internet-connected TVs could be a double-edged sword for YouTube. On one hand, the site could gain by making licensing deals w/consumer electonics firms. On the other hand, other companies (Amazon, Blockbuster, Netflix, Hulu) are also going to be scrambling to make deals, so consumers will have a wider array of options than in the mid-2000s, when YouTube took advtange of an open field.
• Because of the enormous price that Google paid for YouTube, the site has to do a lot more than reach profitability in order to pay off for the parent company. While I don’t think Google is unhappy with YouTube, there is more pressure to perform on YouTube than there would have been if the purchase price had been closer to the ground.

In summary, I think Douglas Anmuth’s projection is a bit aggressive. Taking into account the above, I agree that YouTube’s revenues should grow this year, but somewhere on the order of 10%-20%.

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We recently chatted with Michael La Kier of Coca-Cola about how the company ties social media and mobile marketing into its My Coke Rewards program to drive brand loyalty. From the interview on eMarketer Total Access:

eMarketer: Does the program enable consumers to enter codes via mobile phone?

Mr. La Kier: We offered mobile from day one—it is a big component of My Coke Rewards. People drink our brands on the go and don’t want to carry a bottle cap all day long. They can enter a code via mobile phone and SMS texting. Mobile has always been a pretty big part of our program from a participation standpoint and from a mobile messaging and marketing perspective. We also have a desktop widget so people can enter codes directly from their desktop computer.

We have a variety of ways for people to participate in the program—via SMS, the site and the widget. When they become members, we can look at what brands they’re drinking, which packs they’re buying, promotions they’ve participated in and rewards they’ve redeemed. We look at how people want to interact with us, what information do we want to know, how do we provide value and get value. We invite them to take surveys. We have a lot of information about what consumers are doing and their passions so that we can serve up rewards, offers and sweepstakes based on that information.

eMarketer: How are you using social media platforms to guide strategy on My Coke Rewards?

Mr. La Kier: About 12 to 18 months ago, we created a private social community. We offer the people in this network first looks at new program features and get feedback in the form of discussion boards, activities and interviews.

From a consumer-facing perspective, a lot of the promotion we do on the site has a social element. For example, this summer for Coke Classic we had a design-a-can promotion. People could submit their design, vote and the finalists received prizes.

eMarketer: How have you deployed social media tools to engage My Coke Rewards members?

Mr. La Kier: We already have a base of 13.5 million members. We wanted to provide something fun and unique to highlight the special moments of summer that people share with Coca-Cola. That’s the reason for the collectible can series—to let people interact and create their own summer moments.

Once you created the cans, you could share the designs on Facebook and elsewhere. We created an integrated online and offline program around sharing special moments with Coke in summer. We used social and viral aspects to broaden the likelihood that people would participate in the program. Social media is just another way for us to get the word out and turn our advocates into brand champions.

The full version of this interview is available here, to eMarketer Total Access subscribers only. Every day they have access to new interviews with digital marketing leaders and trendsetting entrepreneurs. We also recently interviewed Coca-Cola’s Carol Kruse about the company’s use of digital media and marketing and the evolution of social media. Those stories are here:

• Coke Weighs in on Earned Media ROI
• Coca-Cola’s Carol Kruse on the Value of Social Media Marketing

We recently chatted with Nick Higgins, the director of global video at Adconion Media Group, about the differences between online video consumption in the US and other parts of the world, the benefits of re-targeting online video, and how marketers can use in-banner video to drive engagement. A takeaway from the full interview (available in eMarketer Total Access):

eMarketer: There has been a lot of discussion in the US about finding an alternative to preroll video. What is a more interactive or engaging unit?

Mr. Higgins: I find that a lot of the conversations at many of the North American digital advertising events that I attend are very linear. The conversation is often just focused on in-stream video products. The fact is that the digital medium is far more versatile and interactive, and in-stream is just one facet of what is available to marketers.

A good example of this is starting a consumer’s journey off around premium content. Say it’s preroll video within CBS’s “Late Show” on CBS.com. Using the Internet, brands can re-target the user from the preroll experience and reach consumers in-banner.

You can then start sequential messaging to a brand’s target audience creating a story and experience. You can also start playing with the different formats, such as in-stream to in-banner video. Or create sequential messaging across different ad formats.

Not only are you changing the messaging and the level of interactivity, depending on your message, you could be driving people down through the communications funnel to brand awareness and engagement and ultimately to a retail offer.

eMarketer: Can you offer an example of a category that’s using these types of video solutions?

Mr. Higgins: In Europe, we’re working with a large automotive company that has looked at the different levels of interaction that they generate via display advertising. This company has tested various ad formats to drive traffic to their Website and encourage in-banner video brand experiences.

Once users have visited their site, the re-targeting takes place with video. They’re able to extend the brand experience at a very low cost. There’s a lot of effort, time and money going into building Websites and driving traffic to them. Re-targeting offers a more cost-effective extension of that messaging.

eMarketer: What kind of ROI resulted from using this method?

Mr. Higgins: Depending on where video was used, the ROI is going to be twofold. There’s a caveat—the use of video as the initial engagement, i.e., Web planning against a demographic or category of size, will be around launching the brand to the right audience. Then the measurements are delivery of the assets, which is the awareness component. The second factor is engagement. Engagement represents the level of interactivity, which depends on how many videos or features within the ad unit the audience has interacted with.

eMarketer: How many options can you offer within the ad unit?

Mr. Higgins: Unlimited. And we’re finding that provided the content is right and it’s matched to the right audience, we’re generating a high level of interactivity. My definition of interactivity is users watching multiple video clips and engaging with the various features within the ad unit.

The full version of this interview is available here, to eMarketer Total Access subscribers only. Every day they have access to new interviews with digital marketing leaders and trendsetting entrepreneurs.