Thumbnails, along with your video title, act as mini marketing posters for your content on YouTube. You should always create custom thumbnails to be uploaded along with the video file. There are a few general guidelines to follow, but the right thumbnail depends on what the video is about.

General Guidelines:

  • Clear, in-focus, hi-resolution (640px x 360px min., 16:9 aspect ratio)
  • Bright, high-contrast
  • Close-ups of faces
  • Visually compelling imagery
  • Well-framed, good composition
  • Foreground stands out from background
  • Looks great at both small and large sizes.
  • Accurately represents the content.

This advice is from http://www.youtube.com/yt/playbook/index.html This is well worth a read if you are interested in building a successful Youtube channel.

To add customised thumbnail you need to enable this in the Channel Settings > Features.  And you cannot enable it without becoming a ‘partner’ which you have to do via the monetisation.  However, it is possible to opt not to have any monetisation (those irritating adverts) and still be a partner and still get the customised thumbnail option.

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