Staci D. Kramer: No matter how much attention you put on the premium efforts, it doesn’t seem like people feel like the nature is changing from user-generated content.

David Eun: There’s a tendency to say YouTube is about UGC and UGC equals bad. It’s the dog on the skateboard analogy. Why do you assume your definition of good is my definition of good? When I go into YouTube I see lots of things. I’ll check an NBA clip out, I may watch a Star Trek episode, I may seen an award-winning documentary, and then I might see some really talented individuals who’ve posted songs they composed or maybe I like pet tricks or things dogs do on skateboards. That certainly hasn’t stopped Letterman.

I think that’s one of the disconnects, because when you’re talking about the cat on the skateboard, it’s not always derisively but I think it can be perceived that way. What I think it’s saying, there’s different kinds of content but there’s content that I want to watch and have a laugh at and there’s content I want my ad next to.

We have content that isn’t UGC, tons of content that isn’t UGC—we have more so-called premium content than anyone else on the web and we’re monetizing hundreds of millions of views of that stuff. It is incorrect to say YouTube is just about UGC. We certainly are and proud of it, but that’s not just who we are. If people want to put us in the UGC-only bucket, it’s one dimensional.

What is an ad worth next to UGC compared with one next to Star Trek?

We don’t monetize UGC today. Let me take that back—we’ve identified top providers of UGC on the site and have made many our partners and have deals with them. We monetize their content.  We don’t monetize everything on the site, as you know. Our experience has been that advertisers are fine with content as long as it speaks to them and the type of users they’re trying to get their products in front of, regardless of the source. Where there’s been a question is putting an ad in front of content they haven’t been able to have complete confidence about. This idea that advertisers don’t like UGC is a huge overstatement.

But will they pay the same for that touch?

They’re not paying for the content. They’re paying for the audience and for the performance around it. Some of our most successful campaigns have been advertisers soliciting UGC directly from our users. They’re paying in some respects higher for UGC; they want the proximity to the content. They want the familiarity with the content. We’re trying to connect with the goals advertisers have of reaching certain types of people on YouTube and a lot of the time it is UGC content. We are trying to get smarter about that and we are getting more sophisticated in the way that we can offer up all sorts of different content.

What we’ve been trying to do is create a sense of infinite choice to our users. In some cases, they really want top Hollywood content or content from the major record labels. We want to provide that for them but they also want access to lots of different content, content they would never have seen elsewhere and sometimes getting access to that content requires different monetization models and we recognize that. In the past, it’s been about short form and monetizing purely through advertising. Internally—and I may have more on this in the future—we’re exploring other monetization paths beyond advertising.

You’ve been working on a few different things that are already part of the makeup of the site. How is click-to-buy working?

(YouTube has stressed click-to-buy, where users can watch a music video, for instance, and then click through to buy the song, as a potentially key revenue component for partners.) What that’s related to is this idea of getting the right ad against the right content and in front of the right audience. There’s been some major changes over the past 12-18 months where we say to our direct partners we want to support your core businesses. That means allowing you to sell your own ads, to piggyback on the extra distribution we provide. Sometimes it includes new ad formats like the in-stream ads, Google TV Ads and things like click-to-buy. You know we don’t really make money on click-to-buy (partners get the majority)—we’re sending traffic and leads out to online retailers and we know that supports our partners’ businesses.

Let’s get some clarity though.

Does YouTube have the potential to make money on click-to-buy? We don’t look to it as a profit center. We look at it as a complimentary feature we provide to people who partner with us.

So far, there are a lot of people who aren’t looking at much of anything on YouTube as a profit center yet—if profit center means actually profit. That’s the outside view. We don’t see all your numbers. It’s a sort of constant refrain. Today, someone sent me a note about the smaller online video operations having problems and the underlying theme was if YouTube’s having problems how are they going to make it. How do you answer that and stay within your guidelines of not talking about money?

We’re monetizing hundreds of millions of video views a month and that’s more monthly views total than our closest competitors. So we’re monetizing more views than they have total views. The results we’re seeing on the monetization front are encouraging. … What we just announced recently with connecting the AdSense for video ads—I don’t know if you caught that, most people frankly didn’t—but we now have the huge reach and analytical power of our Google content network, which covers 80 percent of U.S. internet audiences, and we’re tying that to YouTube as a way to increase the advertising sell through on YouTube.

Even when our direct partners can’t sell their own inventory, we’re backfilling it with AdSense. We’re bring a certain amount of measurability and accountability and huge insights about what’s going on. You add this to the fact that last year we did business with 70 of the top 100 AdAge marketers. We’re continuing to push the envelope just on advertising. As I implied before, we’re even thinking about things beyond advertising but it’s still early days and we’re patient. ... We have the luxury to test things out and to get it right for our partners. We do not think it is about one single model or one single type of ad or monetization approach. As to the other stuff about our costs and revenues, these folks don’t have access to our numbers. They have no idea how efficiently we host and serve our content.

Without having access to that, is it still fair to say that YouTube is spending more it’s making?

I can’t comment on that. Let me put it to you this way: I know that we’re monetizing more than anyone else is making and I know that our costs are significantly lower than what anyone else is serving up and hosting.

Can you afford to keep growing?

We can afford to keep growing if we continue to improve the monetization at the rate we’re improving it. … We’ve already made tough decisions, some of which have gone public, where I’ve said ‘we’re not going to feature certain types of content from partners’ or certain types in certain geographies because people whose approvals we need have presented business models that are not sustainable for us so we won’t do it. We’re not going to make content available if the business model around it is not sustainable.

Can YouTube do more off site, maybe white label? For instance, working with a partner like Universal on VEVO, which isn’t branded YouTube, but also the possibility that you could do another content provider’s site without a YouTube partnership.

We know that monetization and growth is very promising. In the case of VEVO, music content is really popular, of all sorts. What we’ve done is established a partnership where we’re the technology company, they’re the content provider. They’ll be streaming their content through a player we build and it’s going be on a site they’re building called Vevo.com and it’s also going to reside on YouTube. But it’s going to be syndicated all over the web. This idea of doing a closed or walled-garden approach seems particularly dated given how porous and how flexible usage is on the internet. We’ve aligned incentives and there is a sustainable business model here where we get a rev share of all the revenues that are generated across the web.

These questions people are asking about whether people will go to Vevo.com or what will happen to the traffic on YouTube in a way becomes immaterial as long as people are viewing that content and enjoying it. There’s an economic upside for us regardless of where that viewing is. We currently aren’t thinking about being some white-label platform so that companies can go a-z and build an experience on top of us. That’s not the way we define our business. However, we’ve from the very beginning allowed people to embed our video player and customize around that. A large number of views come from off of YouTube.

Do you see a time when you would automatically make sure there’s pre-roll on anything that goes in an embedded player?

We’re thinking through all that. The first thing is what does it do to the user experience? … It would be a mistake to organize around a business model and then try to force the usage around it. It really depends on what we think the users’ reception will be and how effective the advertising could be. We’re going to explore everything because what our partners want is continued favor with our users but what they also want is more distribution and monetization. If embedding prerolls on more content is the way to do that, we’ll explore that.

In terms of partnerships and content, we’ve had a couple of high-profile deals with Disney recently—long-form with Hulu and short-form with you—and (Disney CEO) Bob Iger was pretty clear that they don’t necessarily see putting their content on Hulu as a stopping point to being on YouTube. Is Hulu a potential negotiator with you and could YouTube be a distribution point for Hulu?

I think from the very beginning, whenever people have asked me about Hulu I’ve said a couple of things: they’ve done a pretty good job getting consumers used to full-length content with ads. They deserve credit for that.

We’ve always felt the space is big enough for multiple players. The Google approach to all this is that everyone can be a partner. But we’re very different companies. Hulu is a TV model brought online, owned and created by TV companies. YouTube is more of an open democratic platform and anyone from a filmmaker to a major studio can find a voice on our platform.

When it comes to Hulu [representing Disney and the others] never say never but our approach in the past has been to work directly with our partners because we want to hear exactly what they want and we want to give them exactly what they want. And frankly, they would rather have a bigger cut of the revenues we create for them. Many of our partners also partner with Hulu. We don’t require “exclusive” deals. We actually don’t think that’s the right thing to do for our partners.

Is there a role for YouTube to play in what is being described as authentication by some, as TV Everywhere by Jeff Bewkes?

We think it’s a really interesting concept and a big idea. For some similar reasons, we’ve been committed to a ‘YouTube Everywhere’ approach for a while. Our syndication team has done a terrific job getting YouTube integrated into digital cameras, high def tv’s and mobile phones—in fact, over 300 million 3G handsets worldwide at last count. Providing solutions to help the online video market evolve is bigger than any one company or any one offering though. We want to be a critical part of any solution and are open to working with all the relevant parties out there to make this a reality.  While it, of course, has to support the interests of the MSOs and the networks, it ultimately has to work for users.

Is the idea of providing some content only to pay tv subscribers antithetical to the Google/YouTube emphasis on not being exclusive and on open access?

Open access and non-exclusivity requires that we be open and flexible to our users but to our partners and advertisers as well. We want to provide an experience where everyone wins on YouTube. Focusing on the user and maximizing consumer choice have always been top priorities. If a consumer wants to watch ad-supported full-length content or short clips on YouTube, they’ll be able to do that. If, however, they want to watch a movie just out on DVD, that may require a different business model. We recognize that. Open to us also means accessing different content through different models because we respect the rights of content owners.  We want to build as comprehensive an online video experience as possible for our users, and we recognize that we have to be open, creative and flexible with content owners to do it.