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YouTube Finally Figures Out How To Make Money: Big Ads On Its Homepage

Take a good, long look at YouTube's (GOOG) homepage. You may not recognize it soon: The video site is trying out new ad format that will turn over a good chunk of the page to sponsors.

The move is an obvious step that Google hasn't taken yet as it tries to wring money out of its hugely popular site. Messing around with pre-roll ads, overlays and other ways to insert advertising into the video is one thing. But simply handing over more of the homepage -- its most valuable real estate -- is a relatively easy way to generate dollars.

Advertising sources say YouTube is revamping the homepage to accommodate a huge new banner ad that will span the entire width of the page. The ad will is roughly the same height as the current video ad unit on the upper right of the page, and designed to accommodate high-definition video, similar to the campaign Sony Pictures ran on YouTube to market "Pineapple Express." Sources who have seen the unit describe it having multiple tabs that activate when rolled over by a cursor.

YouTube is shopping the unit to entertainment-industry advertisers, the ones that have most embraced the video site as a marketing tool. They're offering inaugural sponsors a deal to buy the new unit for roughly the same price as the old, or about $200,000 a day. The first is coming within the next two weeks, and advertisers expect YouTube to start bumping the rates up this fall.

Google has been criticized for leaving money on the table by keeping its search page free of advertising. Likewise, the YouTube homepage has until now had pretty minimal advertising, just the window in the upper right corner of the site. But it should be the easiest part of the site to sell, since YouTube has plenty of control of what appears there.

Industry observers think that News. Corp.'s MySpace is getting more than a $1 million for takeover ads on its homepage. One big difference: Unlike MySpace, many YouTube users never end up on the site's home page.

Asked for comment, YouTube offered the pro forma "We do not comment on rumors and speculation," response.