The super-popular video sharing site reports that one of the first advertisers, Warner Bros Records, has planned a channel devoted to Paris Hilton's new album. One of its first advertisers, Fox Broadcasting has bought spots on the Paris Hilton Channel to promote the second season of Prison Break.

The idea that placing ads within ads "further blurs the traditional lines between entertainment and its sponsors," does not seem to be an issue with YouTube CEO and co-founder Chad Hurley: "This is a way for advertisers and brands to participate in our community, to allow them more ability to customize the look and feel for the channel, to build an audience through subscription and allow user interaction with the content they created."

Julie Supan, senior marketing director at YouTube, does not believe that young people mind the ads: "Great ads are in essence great content. We're kind of blurring the lines."

The incentive to further explore ads within ads was spurred on by the success of the ad campaign for the movie "Pulse." Deep Focus, the agency directing advertising for "Pulse," ran trailers on YouTube, but wanted another way to reach YouTube's viewing crowd. Deep Focus CEO Ian Schafer proposed running ads on YouTube's homepage for five days prior to the film's Aug. 11 release. The ads offered the trailer along with exclusive clips from "Pulse." Schafer found that audiences watched the trailer, opted to comment, and to spread the word about the film by sending the trailer to friends."For advertisers that are looking to promote their content, " he said, "this is an extremely effective way to get the word out."

While linking and sharing might spread the word on corporate-generated content, the issue remains on how to capitalize on consumer-generated content. "This gets them money in the short term," Allen Weiner, an analyst with Gartner Inc said. "It doesn't solve the bigger issue, which is monetizing consumer-created content. They're not doing that. And they're in the same boat as everybody else. It's trying to come up with mechanisms that can put the content into various buckets so that the good stuff can be parsed out and monetized."

Terry Heaton takes a look at the recent announcement of a deal between Google and XM satellite radio and the move by ad trading and placement service Softwave into TV ad sales.

The Google-XM deal gives Google access to XM's non-music channels: " As part of the deal, the companies said Google advertisers will have "a simple, automated way to reach XM's millions of subscribers nationwide." XM, in turn, will gain access to Google's large and small advertisers to offer relevant, targeted messages to their subscribers. The deal also signals a more aggressive advertising move for XM, a premium radio service that derives its revenues primarily from subscriber fees."

Softwave "piggybacks on the interest generated by the Adsdaq initiative spearheaded by eBay at the behest of big advertisers, like Wal-Mart." CEO Josh Wexler explains that his company's capabilities " include campaign planning by region and demo target, establishing pricing, negotiations, cancellations, and campaign acceptance. SoftWave can deliver spots, and executes all back-office functionality through an extensive digital infrastructure."

Terry notes that in both cases "we have some smart people with deep pockets trying to blend Internet technologies with offline advertising placements, and that may sound -- at least on the surface -- like good news for broadcasting."

Yet that isn't quite the case. Terry continues: "Broadcasters need to keep a close eye on this, because while Google's efforts heretofore to bring its technologies to the offline world have failed, they are a tenacious and formidable competitor with deep, deep pockets. We need to view them as the Wal-Mart of the advertising world and ourselves as the neighborhood grocer. As [Mark] Zagorski points out, every revolution comes at a price, and Google is now fighting an industry with "deep personal legacies, relationships on both sides of the aisle (salesmen and agencies), and an ingrained infrastructure of people that need to keep paying their kids' tuition bills." It will not go down without a fight."