9/14/11 UPDATE:

Getting the right thumbnail on youtube is certainly different than it used to be.  Youtube no longer picks exact frames within your video.  Instead they choose a random frame near certain points in the video.

Here is an estimate of what they are currently doing: They are adding about 1 second to your video and then are choosing the frame 1/4 of the way; the frame at the half way point; the frame at the 3/4 mark.

Solutions

1. If you don’t care about sticking a picture in the middle of your video (make sure you add about a second to the length of your video before calculating the half-way point), then create a great looking thumbnail and make it a second or two long at any of these points.  This will allow you to pick the correct thumb.

However, most people don’t want their thumbnail to interrupt the video even for a split second.

2. Your other option is to sign up as YouTube Partner.  Once you are a YouTube partner you can choose any thumbnail you like.  The catch with becoming a partner is that you need to make sure all your videos and soundtracks are all original and do not infringe on any copyrights. So no clips from the TV, movies or music from your favorite bands.  Follow the link above to see all the qualifications in becoming a YouTube Partner.

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2/15/08: YouTube certainly does not have the best quality video out there (not by a longshot), but if you want to post a video for viral distribution and search optimization, you have to upload your video to it. Anybody who has uploaded a few videos to YouTube knows that the thumbnails YouTube picks for you can be quite lame.

As far as video search optimization goes, the thumbnail (the still image they see before your movie runs) is an extremely important tool in compelling people to click on your video. It’s no different that choosing the magazine with the better cover at a newsstand.

Most other video serving sites let’s you pick your own image…not YouTube. YouTube generates three seemingly random thumbnails to chose from. However, after a lot of debate about how they choose the thumbnail, “thecro” did a simple, smart experiment to end the debate. Thumbnails on YouTube are generated at the frame exactly 1/4, 1/2 and 3/4 throughout the movie. See 32 second test vid to see how he solve the puzzle.

So now you know the secret to YouTube’s puzzle. Use smartly and responsibly. I have a feeling that many, many savvy/seedy folks are already starting to put 1 frame of a sexy woman at the exact center point of the video. That is actually classified as subliminal advertising and is illegal on broadcast/cable TV. That’s a whole ‘nother story.