YouTube's advertising revenues are falling short of expectations because of concerns about intrusiveness, fears among corporate advertisers about copyright infringement and an inefficient sales operation.

The Google-owned video-sharing website dominates online video, but it has taken in less advertising revenue than was expected so far this year and is on course to record about $200 million (£100.93 million) for the full year, below previous expectations.

Google does not give a breakdown of the revenues at YouTube, but its executives have said repeatedly over recent months that they have struggled to find a way of introducing and selling advertising into the vast library of video that it shows every day.

The $200 million figure is far below the huge revenues that Google generates from search-related advertising. First-quarter revenues at Google were $5.19 billion, implying that video advertising will account for only 1 per cent of all turnover by the year's end.

Google executives have said in recent months that they have yet to work out how to make money from YouTube, although the official message from the company is that eventually it will establish an approach that works. Its failure to do so remains a relief to broadcasters, which otherwise are at risk of seeing substantial income migrating to online outlets.

Concerns about copyright litigation are a huge deterrant for some corporate advertisers after several court cases from media groups in connection with clips of films and television shows that were posted on the YouTube website by users without authorisation from the originators.

Google is still fighting Viacom, the American media group that owns MTV, over alleged copyright infringement. Until the case is resolved, worries remain about YouTube's ability to post videos on its site freely.

Although Google claims not to have broken any copyright laws, it has significantly reduced the number of clips against which it sells advertising space to lower the chance of copyright infringement. In other cases, companies have balked at running advertisements next to the amateur footage that makes up a significant portion of YouTube's content.

There are also thought to be problems relating to YouTube's advertising sales operation. “Project Spaghetti”, an initiative aimed at improving the efficiency of YouTube's advertising sales operation, is understood to have identified about 105 problems with the system.

Some YouTube advertisers, for example, are required to complete three or more separate legal contracts - a complex, time-consuming and off-putting exercise. Meanwhile, YouTube lacks a fully automated billing system.

Advertising on YouTube is a key component in the aggressive growth plans of Google, which made 98 per cent of its first-quarter revenue from advertisements. Google is still growing rapidly, with revenues up 42 per cent in the first quarter, but the growth rate is slowing: a year ago it was advancing at 63 per cent.

A YouTube spokesman said: “The Google model is one of innovation and experimentation. We continue to test new ideas to create marketing solutions for our users, partners and advertisers. This philosophy continues at YouTube, where over the past months we have learnt a lot about what works and what does not work for our community and advertisers.”

Meanwhile, Google launched a three-dimensional virtual experience website this week to rival Second Life, the popular virtual world. The service, called Lively, uses real-time virtual world characters known as avatars and three-dimensional graphics to congregate in virtual rooms.

Lively allows YouTube videos to be played on virtual televisions and shows photos in virtual picture frames inside the rooms, Niniane Wang, the engineering manager who oversaw its development, said.

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