Despite the commanding position of YouTube, with 40 percent of video streams in the U.S., the quality of the environment for advertisers is not always acceptable, according to leading digital advertising executives.

Rob Norman, CEO of WPP’s giant GroupM Interaction, the digital media buying group, says that despite the availability of high quality video ads to go up on the Web, the technical quality and environment of sites like YouTube is not acceptable. He says the current environment is “complete crap.”  (His comments come at the end of this clip.)

GroupM says it is the world’s largest media buying company, with billings of $60 billion.

Ogilvy’s Robert Davis and Digitas’ John McCarus discuss the value of YouTube as a powerful distribution platform with value and limitations.

YouTube has recently increased the number of pre-roll ads and has expanded its relationship with many ad agencies.

This is an excerpt from last month’s Beet.TV Online Video Roundtable held at the New York offfices of msnbc.com. 

Moderating this section is Michael Learmonth, reporter for Advertising Age.  Michael recently reported how consumer package goods are using online video advertising in a big way.

Andy Plesser, Executive Producer

Video Transcript

Michael Learmonth:  Eric Smith said yesterday or the day before that YouTube is now doing business with 90 of the top 100 AdAge, top advertisers. What are your clients saying about YouTube? What, if anything, are they doing on YouTube, and do you think YouTube has figured out the scalable model that’s going to work for them?

John McCarus:  Well, I would say for Digitas and the Third Act, which is our brand content platform, that we’re very much working with YouTube as a distribution partner. I think one of the challenges is they spent some time trying to dabble in the content business and I’m not so sure if that’s an area where they can see a lot of sucess.

Michael Learmonth:  Well, they had one big go with that, right? And they said they were going to do more and it just didn’t happen.

John McCarus:  Yeah, and look, they’re a terrific distribution network and a terrific technology platform and what we have to remember on the web is that, unlike in broadcast television, we have the opportunity and challenge for packaging all of this ourselves as clients and advertisers. It is, with the right thinking, successful and many times the best solution. So we are putting YouTube together with the right content solutions and have actually some big programs that will be announced shortly.

Robert Davis:  Yeah, I think, you know, not to comment on their business model, that’s whatever they try to do, they try to do, right? Now, it’s essential. They own so much of the market that it’s essential for clients to be there, to be well represented. Are they the end-all, be-all? No, but they own 40% of the views, so you deal with them and then you deal with the other 60% as you can.

What I see as I look around at YouTube though, is that it’s not being used to its fullest extent. I’m amazed at the poor quality of video that’s being posted. And that’s not YouTube’s fault, that’s the fault of the people putting up the video…

Michael Learmonth:  Well it’s their fault that they don’t surface the good stuff, right?

Robert Davis:  Well no, just even technical quality, forget even content. I’m just looking at it, going, “If somebody put that on TV looking that way, they’d be fired.” Why is it acceptable? Full gamut. Why is that acceptable online? So I think there’s things that we, as an industry, need to start realizing that YouTube is probably more powerful than we’re making itself.

Rob Norman:  So it’s maybe ironic when you look at YouTube, and we’ve now got this host of HD delivery systems. If you actually looked up, it’s possible that today is lower proportion of all video that’s consumed is consumed at the highest possible quality that was available than ever before. Because, although we’ve got HD and we’ve got a whole load of ads in HD, we’ve also got millions and millions of pieces of video being consumed in a customer delivery quality that’s complete crap. It’s kind of interesting.