YouTube’s business plan emerges from mist

Acute observations from Good Morning Silicon Valley.

This morning YouTube lit up its “Paris Hilton Channel,” a collection of videos, interviews and other detritus offered in promotion of “Paris,” Hilton’s first effort as a recording artist — and along with it an ad for Fox’s TV show “Prison Break,” revenue from which will presumably underwrite some of the site’s bandwidth costs. “So will Paris Hilton and other stars counteract YouTube’s ludicrous bandwidth expenses,” asks Mashable’s Pete Cashmore. “I actually think they might — despite all the anti-hype around YouTube and the recurring question ‘Where’s the Business Model,’ I think it’s pretty clear that YouTube is a powerful branding platform — and not just for stars like Paris Hilton. MySpace has totally changed the nature of advertising — users now make friends with brands (see MySpace Marketing and Dasani’s custom MySpace layouts), and advertising is no longer about pushing content to people when they don’t want it. The Paris Hilton channel is just the start, and I expect to see hundreds more of these things springing up — why shouldn’t every media company have their own YouTube channel and MySpace page?”

Planned pay-for-placement channels are just one part of YouTube’s new advertising strategy. The video-sharing site has begun displaying commercials on its homepage as well. Interestingly, the site treats these ads just like any other video it hosts — allowing users to rate them, comment on them, or even embed them in their own Web sites. “These days, consumers are like walking TiVos, filtering out so much of what they see and hear in advertising,” said Mark Kingdon, chief executive of digital ad agency Organic, which produced the “Prison Break” spots appearing on the Paris Hilton Channel. “To reach this media-savvy demographic, advertisers have to ‘give to get.’ In other words, they have to give viewers something special, something unique, in exchange for their attention.”

Later… More useful reporting on TechCrunch.