It’s no secret that YouTube has been struggling to create a viable business model. The network is extremely popular obviously and packed with user-generated videos plus a smattering of “professional” videos including music videos. In 2006 YouTube struck deals with several music companies to license their music content to YouTube both in hopes of creating revenue but it hasn’t measured up.

Now Google which owns YouTube is working with Universal Music Group to create Vevo a new music hub on YouTube (and its own site vevo.com) to generate money from ad revenues from “professional” music videos. The idea was said to actually come from U2’s Bono. If it works Vevo would compete with music videos on MySpace. Currently some advertisers are quite tentative about advertising on YouTube because basically the content is not controlled. Advertisers are far more comfortable with professional videos -which is where Google/YouTube and Universal are hoping to make their money by launching Vevo later this year.

Some of this thinking came from the relative success of Hulu a hub that hosts NBC and Fox movies and television shows and generates ad revenue. But of course Hulu isn’t nearly as large as YouTube. One reason being that Hulu is not made of user-generated content which frankly is one of the main attractions of YouTube -for fans watching and those creating homemade videos for others to watch.

Interestingly this all goes back to the concept of trying to make money from the old-school model of advertising. Not to say that some money can be generated from ads but we predict that the real revenue source will end up coming from the roll-out of Vevo’s merch offerings and eventual ticket sales.
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