Aug. 14 (Bloomberg) -- Google Inc., seeking new ways to make money from Internet-search advertising, is dressing up its plain-text search ads with movie and TV previews.

After starting to test videos in its ads last year, Google is considering adding product-demonstration clips to the experiment, said Nick Fox, a director of business product management working on the project. The advertisements look similar to traditional ads, except for a small box with a plus sign. With a click of a mouse, the box opens a video player.

“It’s clear that this is something that users want,” Fox said this week in an interview. “It ties back to trying to understand what a user is doing on Google, what an advertiser is trying to sell -- and matching those up.”

Google, facing a slowdown in Internet ad spending, may use video to squeeze more revenue from its search engine, said David Hallerman, an analyst with EMarketer Inc. in New York. Video will make up 4.3 percent of the online ad market in the U.S. this year, growing to 11 percent by 2013, he estimates.

“Video is becoming more and more a common language,” Hallerman said. “The marketers want to be able to place marketing videos in front of an interested audience.”

Advertisers have used the video ads to promote the movie “Extract,” starring Jason Bateman, and VH1’s “The T.O. Show,” which features Terrell Owens, the National Football League player.

Getting Paid

With traditional search ads, users have to click through to another site before Google earns a fee. With the new movie- preview ads, customers pay the company if a user watches the video for a certain length of time, or clicks on the link.

The appeal of video is demonstrated by Google’s YouTube, the most popular video-sharing site in the U.S., Fox said. The company already provides video ads on YouTube and on other businesses’ sites, which use Google’s AdSense service.

Google, which makes most of its money from search advertising, has to be careful not to add too many videos to ads, Fox said. Users don’t want to be distracted with extra information that isn’t helpful, he said.

“We don’t want to just show videos from the perspective of: Here’s something flashy on the page,” he said. “From a user perspective, when you’re looking for a movie, the absolute most useful piece of information you want is the trailer.”

Product Clips

Product-demonstration videos could help Google users quickly understand what an advertiser is offering, Fox said. Many advertisers, such as wireless carriers, already have product videos. So it’s not hard to put them in their current ads, he said.

“Things like pictures and prices are useful, but for more complex products, a video can actually capture that quite well,” Fox said. “You want a video that shows all the functionality.”

The Mountain View, California-based company also is adding other features, such as maps, to search ads. That’s helping local businesses quickly show their locations.

Google dominates the search market, accounting for 65 percent of U.S. queries in June, according to ComScore Inc., a research firm in Reston, Virginia. Yahoo! Inc. was second with 19.6 percent, while Microsoft Corp. had 8.4 percent.

Google fell $2.28 to $460 at 4 p.m. New York time on the Nasdaq Stock Market. The shares have climbed 50 percent this year.

To contact the reporter on this story: Brian Womack in San Francisco at Bwomack1@bloomberg.net

Last Updated: August 14, 2009 16:03 EDT