As a novice in the world of online marketing campaigns, I recently discovered that Youtube ads work very differently from the usual cost-per-click (CPC) or cost-per-thousand impressions pricing models. Christened TrueView ads, you are only required to pay once a user watches the video. These TrueView ads essentially come in three different flavors.
The first, and arguably the most talked about, is TrueView InStream ads. These are the video ads that are so ubiquitous on YouTube these days. They precede a video with the user given the option to skip them after a few seconds. You would be required to pay only if the user watches the video for 30 second or through to the end, whichever comes first. Clearly, the fact that users are allowed to skip the ad after the first 5 seconds means that you have a really short window to convince them to stay on. If TrueView InStream is how you want to create Youtube ads, it's clear that you have to keep them short, engaging, and finish with a call to action. 
The second option, the one I chose, is TrueView in-display ad. This is essentially a thumbail image with an accompanying text that and appears next to the list of similar and recommended videos. Once again, your payment obligation arises only after someone has clicked the video to watch it. Just like the 5 second window above, the role of a compelling thumbnail becomes crucial. It has to be clear, enticing, and hook the interest of the viewer instantly. I also made sure that people clicking to my thumbnail ad would be presented with a clear call to action, which in my case was an invitation to subscribe to my channel. 
TrueView InSearch is similar to in-display ads in all respect except the fact that it appears on Youtube search results page. Youtube puts a character limit on your custom headline and custom description, so you have be judicious while creating them.