News Corp. and NBC Universal will challenge Google's YouTube for online eyeballs and advertising dollars by launching a video-streaming Web site by the third quarter, News Corp. announced Thursday.

Through a promotion deal with AOL, Microsoft's MSN, MySpace and Yahoo, the new site will reach 65 million viewers, accounting for 96% of U.S. unique online users on a monthly basis, the company said.

To keep those viewers, NBC and News Corp. will offer free viewing of TV episodes by supporting the business with advertising by Cadbury Schweppes, Cisco, Esurance, Intel and General Motors. The partners will also try to create an interactive Web community by inviting users to create personalized video playlists, mashups, online communities and a video-search function.

NBC and News Corp. could also use the site as a virtual channel some day, licensing and producing original programming in addition to the standard network fare including programs like "Heroes," "24," "My Name is Earl," "Saturday Night Live," "The Simpsons" and "Prison Break."

In contrast to the amateur clips available on YouTube, the new site will give consumers professionally produced video, said News Corp. President Peter Chernin in a statement. The site will offer a library of premium content from a dozen networks and two film studios. The partners have not announced the site's name or management, but said that its transitional leader will be George Kliavkoff, who is currently NBC Universal's chief digital officer.

Rather than pull viewers away from its partner portals, such as AOL, the site will feed its video to them. That design will allow viewers to play videos without leaving AOL's site or even opening additional Web browser windows, according to a statement by AOL spokeswoman Anne Bentley.

AOL also played down the brewing rivalry with YouTube, saying that YouTube owner Google also holds a five-percent stake in AOL. So both companies will benefit as AOL draws a portion of the advertising revenue generated by the new site, Bentley said.

Likewise, MSN parent Microsoft said the new site could create a major new revenue stream through advertising dollars.

"Our investments in MSN Video and SoapBox over the past couple of years have shown us that video is an amazing driver of user engagement and excitement, both for consumers and for advertisers," said Kevin Johnson, president of Microsoft's platform and services division, in a release.

The IDG News Service is a Network World affiliate.