Looking for more ways to make some revenue from its $1.65 billion purchase, Google (Nasdaq: GOOG) has begun inserting ads within YouTube videos, reversing its current practice of running ads on a page where videos are featured or placing them before or after the clip plays on screen. Under the new format, the ads will appear as translucent animations or graphics overlaid on the lower 20 percent of professionally produced videos, such as those from media companies like Warner Music Group (NYSE: WMG) or Fox (Nasdaq: NWS). And in a few cases, user-generated clips on YouTube will also feature the animated ad overlays, which are being called YouTube InVideo ads. More details on the YouTube blog.

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BW:  Advertisers will be charged each time an ad is shown, sharing part of the revenue with the clip’s creator, which continues the program that started back in May. The use of overlays represents a significant leap in YouTube’s evolution, as well as online video in general, especially as advertisers and users have consistently registered their increasing displeasure with other forms such as prerolls.

LAT:  “The experiment, which has been quietly underway for several weeks, features ads on videos from Warner Music Group, Ford Models and lonelygirl15. YouTube product manager Shashi Seth said he found that this approach had a higher response rate than traditional display advertising; 75% of those who started to watch the ads kept watching until the end.”