YouTube testing mobile video ads

Move follows expanded mobile platform, Schmidt's comments that mobile will be huge

Now we know why Google CEO Eric Schmidt couldn't resist telling CNBC's Jim Cramer last week that his company's opportunity from mobile ads will be even bigger than the Web market it's currently addressing. 

YouTube said on a blog posting today that it's begun testing mobile video ads in the U.S. and Japan.

This follows the sites revamped mobile interface earlier this year which put the entire YouTube catalog in the hands of mobile users with advanced video phones.

The move is Google's first shot at trying to monetize YouTube mobile content.

It will be interesting to see what luck Google has with mobile brand advertisers, who so far have been willing to pay high CPMs to get targeted ads in front of users. Those ad buyers are going to be reluctant to advertise next to user-generated content, just as they are in the non-mobile realm.

The experiment will also serve as a good test case for the company's full push into mobile beyond its own content. Google wants to dominate mobile search in the same way it does from the desktop and its massive scale makes it easy to believe Google will be able to pull that trick off.

Brand advertising, which Google is starting to exploit more thanks to its DoubleClick resources, is a different beast online.

The mobile phone is a highly-personalized device, and individual ads based on behavioral data, location and phone type are where the  big CPMs are going to be.

AdMob and others are already selling tailored ads that can use the full funcitionality of the iPhone, for example, and getting some brand CPMs as high as $30. (Not sure what the sell-through rates are on those.)

With the iPhone accelerating the move toward off-deck applications in the U.S., consumers are going to have more choices about any app they put on their phone -- including search and video search.

While Google stands a fair chance of being the 800-pound mobile gorilla, the market is still nascent enough that some well-funded startups could get significant traction.

The key for Google will be how successful its Android platform is, since Google will have the home-field advantage to sell search and display ads there. Now that the FCC has approved the first Android phone, and Google looks ready to release is software developer kit, Android looks poised to enter the mobile platform fray later this year.

Given the number of competing platforms and interests -- carriers, handset makers, developers, ad networks, etc. -- the mobile ad network during the next few years should be wide open, and as interesting to watch as the settling of an Old West town.