YouTube on Tuesday took a major step towards converting clicks to cash by launching its first "branded channel" — a project spearheaded by celebutante Paris Hilton and designed to reap profits from the video Web site's exploding popularity.
The privately-owned site, which recently announced it was showing 100 million videos a day, will now offer advertisers the opportunity to create customized sets of Web pages that will carry videos, ads and other content.
Warner Music Group (WMG) was the first to roll out one of the dedicated channels, with a campaign for Hilton's album, "Paris," which was released Tuesday.
A video link to the page is on the right hand side of the YouTube home page.
The ad also allows users of the site to rate the music video — by lunchtime Hilton had scored two out of a possible five stars — and to buy cell-phone ring tones.
Fox Broadcasting, which is owned by News Corporation (NWS), the parent company of Times Online, has paid an undisclosed amount for a banner ad to appear above the Paris ad, to publicize its television drama, "Prison Break."
YouTube, which was launched in February 2005 by 29-year-old Chad Hurley and has raised at least $11.5 million from Sequoia Capital, the venture-capital firm, will share subsequent revenues from the Fox campaign with Warner.
The move marks a long-anticipated change in tactics from YouTube, which to date has focused on providing a forum for members of the public to post homemade videos.
Several of the amateur offerings have become online cult phenomena, attracting tens of millions of hits.
But in recent weeks YouTube has started a concerted drive to commercialize its site, part of the so-called "Web 2.0" second generation of online companies, which often allow users to post their own content and collaborate on projects.
YouTube is under pressure to raise revenues to fund the cost of streaming such high volumes of content. According to estimates, it pays at least $1 million a month in bandwidth costs.
The Techcrunch blog said: "Some people have been concerned that it would be a challenge to turn its huge traffic into money. Thus Paris Hilton to the rescue."
YouTube is also in talks with Warner Music and Britain's EMI Group to show music videos online. YouTube has said it wants to carry all major music videos within the next 18 months.
Mashable.com, a blog that tracks Web 2.0 companies, said: "It's pretty clear that YouTube is a powerful branding platform — and not just for stars like Paris Hilton."
It said that social networking sites such as MySpace (also owned by News Corp.) have "totally changed the nature of advertising — users now make friends with brands, and advertising is no longer about pushing content to people when they don't want it."
Google (GOOG), the online advertising leader, has launched a similar service to YouTube. As part of a separate project, it also offers video adverts which are only played when a user clicks on them.
After this year's Sun Valley conference in Idaho, the annual gathering of media executives organized by investment bank Allen & Co, it was speculated that YouTube could command a price tag of as much as $1 billion.
Some analysts disputed that figure, citing potential copyright issues with much of the content posted on the site.
Click here to view the Paris Hilton channel.
MySpace.com and the FOX broadcasting network are both owned and operated by News Corporation, which also owns and operates FOXNews.com.