Ultimately, YouTube was thinking more of selling the company then selling ads, clocking in a mere $15M throughout all of 2006.

But, those numbers have begun rising. While everyone is looking for the equivalent of the 30-second ad (pre-roll, overlay, PiP) I’ve long argued that the good old fashioned display banner will probably be most material in driving online video revenues from $1.25B this year to $7.1B in 2012, in the form of a companion ad.

Rationale is simple: with text content, you scroll down quickly and zoom by the display ads, whereas with video, your eyes are focused on the video player - and companion ad - for 1-3 minutes. Call me crazy: but the value of that ad is far more than a traditional display banner in text content, and considering that pre-rolls turn off viewers, then you are left with no choice but to start spending more and more moola on the companion ad.

Apparently, the people paid to come up with this kind of thinking - analysts - finally agree:

Earlier estimates pegged YouTube’s 2008 revenue around the $100 million range, but last month Forbes floated a $200 million estimate for this year, and $350 million for next year. Now Citi’s Mark Mahaney says YouTube could generate up to $500 million in net revenue next year.

Google famously hasn’t figured out how to sell ads in the video stream itself, though it keeps promising that it will. Doesn’t matter, Mark says: It can get most of that $500 million from run-of-the mill display ads.

Good to see people coming to their senses.

Disclaimer: WatchMojo.com provides video content to YouTube.