Google Goes to the Guggenheim to Take YouTube Fare Upmarket

YouTube will fill the cylindrical atrium of New York's Guggenheim Museum with video installations that may feature anthropomorphic sneakers, avatars from virtual world Second Life, and a woman turning into an animated crow.

The exhibition, set for October, will showcase videos from as many as 20 finalists of YouTube Play, a contest for graphic artists and users of Google's (GOOG) video site. A celebrity jury that includes Japanese pop artist Takashi Murakami and The Wrestler director Darren Aronofsky will wade through about 200 videos whittled down from thousands submitted in July.

Google's dalliance with the fine arts is part of a broader initiative to attract top advertisers and a wider variety of users to YouTube. The world's largest video site, which Google bought in 2006 for $1.65 billion, is still synonymous with clips of babies and other amateur fare. Teaming with a premier art institution and rewarding contemporary artists may help make YouTube's brand more upscale, analysts said.

"Having content associated with the Guggenheim draws in a different kind of demographic than kids crashing their skateboards," said Bill Niemeyer, senior analyst with the Diffusion Group, a Frisco (Tex.)-based digital media analyst group. "It also produces a halo effect for them with decision-makers at agencies and advertisers."

Profitable This Year?

Making YouTube into more than a money-losing side project could help Mountain View (Calif.)-based Google reduce its dependence on search-related ads. Such ads account for the bulk of Google's sales, though in recent years growth has been slowing.

Sales of ads shown in online videos are expected to increase to $1.51 billion in 2010, up 48 percent from last year, according to market tracker EMarketer Inc. Mark Mahaney, an analyst at Citigroup (C) in San Francisco, estimates that YouTube will account for $614 million of Google's net revenue this year. The unit should turn a profit by yearend, he said in an interview. Google doesn't disclose YouTube's sales.

The number of advertisers buying all types of ads on the video site grew 50 percent in the past year, according to Google. Those buying graphical display ads increased tenfold. Prominent marketers this year included General Electric (GE) and Nike (NKE).

YouTube is luring more advertisers and expanding sales even as competition for Web video heats up. It ranks fifth in total video ads viewed, behind Hulu Inc., video ad distributors Tremor Media Inc. and BrightRoll Inc., and Microsoft Corp. (MSFT), according to ComScore Inc. (SCOR) in Reston, Va. The 219 million video ads on Google in July were less than a third of Hulu's 783 million. Hulu is talking to investment banks about an initial public offering, a person with knowledge of the plan said last week.

Wider Cachet

The Guggenheim exhibition is an opportunity for Google to show that YouTube has cachet beyond the confines of the Web, said Tracey Scheppach, a senior vice-president and video innovations director at Starcom MediaVest Group, a media buying and communications company owned by Publicis Groupe (PUB:FP) that has worked with Google. "They are trying to fit into the culture of where premium advertisers live."

Still, YouTube lags behind Netflix (NFLX) and Hulu in offering the most attractive content in the eyes of most viewers and advertisers: new TV shows and movies, said David Hallerman, a senior analyst at EMarketer in New York. The most popular shows on Hulu, such as Family Guy, The Office, and The Daily Show, aren't available on YouTube.

Mass Culture

"Most of the traffic is not on a higher cultural plane; it's more mass cultural—so that's where the greater ad dollars will come," said Hallerman.

YouTube has added professionally produced video to the site including shows from World Wrestling Entertainment (WWE) and Spanish-language broadcaster Univision Communications (UVN).

Google is working with film director Kevin Macdonald to create a documentary based on video clips shot by users on a single day in July and submitted to YouTube. Macdonald, who won an Oscar in 2000 for the documentary One Day in September, is compiling videos submitted for Life in a Day, set to premiere in January at the 2011 Sundance Film Festival. Google teamed with Carnegie Hall last year to host the YouTube Symphony Orchestra, a concert by young musicians who auditioned using the video site.

"Being able to run initiatives like these highlights the brand in a different way than traditional advertising does," said Ed Sanders, senior marketing manager in the Google Creative Lab. His division, operating from Google's New York offices, helps build awareness of YouTube and other Google brands.

"Throwaway Idea"

Hosting an online art competition was a "throwaway idea from one of the young guys" in Google's London office, according to Sanders. The idea gained support, partly because it would highlight new ways people can consume online video, he said.

The tieup with the Guggenheim was the easy part, said Sanders, who also coordinated the Carnegie Hall event. "When you pick up the phone and say you're from Google, people are intrigued to chat," he said. Neither partner would disclose financial terms of the project. The event is being sponsored by Hewlett-Packard (HPQ) and Intel (INTC).

"We're responding to new developments in contemporary art and visual culture," said Joan Young, the Guggenheim's associate curator of contemporary art. "YouTube has such a prevalent role in visual culture right now."

The museum has agreed to host YouTube Play every two years. The winning entries will also be displayed at Guggenheim museums in Berlin; Bilbao, Spain; and Venice, Italy. The contest lets emerging artists use YouTube to get exposure for their work.

"It levels the playing field and allows anyone to compete," said Adam Stoves, a 24-year-old graduate student at the University of Nevada, Las Vegas, who creates short videos.

After hearing about the contest from his professors, Stoves submitted Undead Shoe, a 71-second video about a shoe left in a gutter that comes to life. To the side of the screen, a video of Slovenian philosopher Slavoj Zizek plays in a haunting loop, repeating the phrases "You are undead. You aren't dead."

The videos submitted for the contest mark a step in maturity for YouTube, said the Diffusion Group's Niemeyer. "It's part of the process where YouTube grows up."

Correction note: (This story was corrected to reflect accurate spelling of the name of artist Adam Stoves and his video Undead Shoe).

Before it's here, it's on the Bloomberg Terminal.