Internet video revenue, which now comes mostly from advertising, is expected to grow from about $2 billion this year to $7 billion in 2010, according to Parks Associates, an industry research firm.

“There's no question you're seeing a higher volume of ad spending moving from traditional forms of media to the Internet,“ said Kurt Scherf, vice president and principal analyst with Park Associates. “The question is, is it sustainable” for online video?

Google-owned YouTube, which has users who watch 3 billion videos a month, this week launched a new advertising program for banner and in-video ads that seeks to find a way to make money from Google's $1.65 billion investment in the firm.

But Scherf and some other analysts remain skeptical that advertisers will want to put ads in amateur, poor quality videos common on YouTube. He says advertisers are more likely to gravitate to quality – such as TV shows made available online by the major networks.

“Odds are they going to have some success on marrying advertising to higher level content,” Scherf said. “But I just don't buy into this idea that all of us are going to watch YouTube and we're going to put it on our TV and watch ads with it.”

From the article "San Diego start-up seeks financial angle as popularity of Internet TV keeps growing," by Mike Freeman.

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