On Monday, when much of America was on holiday, Google swept in for one of the big new media deals post-ad recession, agreeing to a $1.65 billion stock deal for YouTube. In addition to creating the latest raft of internet zillionaires, the deal affirms the coming huge role of video sharing.

In just a year and a half, YouTube rose to become one of the internet’s most popular sites, and in its wake have come scads of others offering users the opportunity to post their favorite films to share with friends.

But, as with so many things on the web, being all the rage is one thing; making money from it can be quite another.

“How people monetize those properties is the big burning question at the moment,” says Henry Stokes, partner at Circus Street Ltd, a London-based digital media consultancy.

Advertising looks to be the likely course, but even here there are reservations. One is the worry of upsetting users, a group who over the years have learned to lace up their shoes and walk whenever they have an off-putting experience at a particular site.

But even solving that issue will not likely open the floodgates for waves of advertising revenue. The photo-sharing sector will never dominate internet advertising they way search now does, and for a few reasons.

YouTube, started from a garage in Silicon Valley by a few entrepreneurs, now has nearly 50 percent share of the user-generated video market, with visitors playing some 100 million videos a day. But while the largest, it’s hardly the only site for videos. Challengers now include Yahoo! and Microsoft, as well as the top social networking site, MySpace, which also has video sharing.  

But there’s another aspect of video sharing that makes sites such as YouTube so attractive to investor groups. The thinking is they could become the beneficiary from any slump that may occur in TV and movie watching.

“So if in the future there is less interest in broadcast TV or the movies, then Google now has a showcase for video,” says Jennifer Simpson, analyst at the Yankee Group. This could bring in the advertisers, who are trained up on TV and would see the similarities between TV and internet videos.

The challenge will be to first discover the right ad model. All the major sites are busy experimenting.  Some, YouTube included, are trying display and contextual advertising. Others are using ad pre-rolls or post-rolls, which are short commercials that run just before or after the video that someone has chosen to download.

“Users understand this sort of advertising, advertisers understand it and it’s the type of video advertising most advertisers want to run online,” says Elliott.

But again, there are concerns. Advertisers fear their ads will be placed next to offensive or objectionable content. There are also copyright issues, the worry that an ad might be placed with a video where the user, an amateur filmmaker, say, may have unknowingly violated someone else’s copyright.

Media buyers are aware of both concerns. A recent poll of Media Life readers found that 14.9 percent would never advertise on a user-generated content site, which also includes social networking sites as well as video-sharing sites. They saw the sites as too risky because of the possibility that their client’s ad might end up next to something risqué, controversial or libelous.

The majority, some 85 percent, said they evaluate on a case-by-case basis, depending on the site and the advertiser.
 
For its part, YouTube is about to unleash software to help it comb through videos posted on the site and pinpoint those using copyrighted entertainment. Other sites are likely to follow.

YouTube is also just beginning to experiment with another advertising option. The company has done deals to put content up, sometimes on separate channels on the site, with the likes of CBS, Sony BMG and Universal Music Group.

YouTube will share with the content providers the ad revenues generated from those downloads. These promotional deals will also help address YouTube’s copyright concerns. At least those videos will have clear copyrights.

But while this model has promise, it also raises a big question

Will people come to watch those professionally done videos in enough numbers? Says Emily Riley, an analyst at JupiterResearch: “Promotion could potentially be a big revenue stream at first for YouTube, but people will have to be willing to traffic those channels of the site in order for YouTube to grow this model.”

Meanwhile, in online traffic for the week ended Oct. 1, Microsoft led the top five parent companies, ahead of Yahoo, Google, Time Warner and News Corp. The top five brands were the same as last week: Yahoo, Google, MSN/Windows Live, Microsoft and AOL.

Gus Plc was the top advertiser once again, with 8.74 million impressions. NexTag Inc. came in second with 6.47 million impressions, followed by Netflix in a distant third at 2.10 million impressions, and E*Trade Financial at 1.50 million for fourth and InterActive Corp. in fifth with 1.33 million impressions.

Sessions per person lingered at 16 while domains per person dipped 2.63 percent to 37. Average PC time rose 2.82 percent to 16 hours, 23 minutes and 56 seconds.