Editor’s note: This is the fourth in a series of posts by guest writer Ashkan Karbasfrooshan.Previously, he wrote about the State of Online Video, 12 Surprising Things Holding Back Online Video Advertising, and Context is King: How Videos Are Found And Consumed Online.  In part 4 today, he examines where he thinks the sweet spot is for making money in onljne video. Karbasfrooshan is the founder and CEO of WatchMojo.

In Search of Profits

Ten years ago, web companies didn’t generate much revenue.   These days, web companies are some of the most profitable around.  Online video is where the Web was ten years ago: in investment mode as video companies that are generating high revenue are not necessarily the most profitable.

Are those companies suffering low margins because they’re investing in the future or are they fundamentally lower-margin businesses?

Ad Networks Are Low Margin Businesses

This week, video ad network Brightroll raised $10 million from Scale Venture Partners.  Ad networks aggregate audiences and sell ads to marketers, sharing the proceeds with publishers/producers.  Scale’s Rob Theis’ argues: “the most strategic Internet investments are those that compete not with other Internet businesses, but with the much larger amount of money still being spent offline.”

Brightroll’s CEO Tod Sacerdoti added: “I think by this time next year the majority of the top five to ten video properties by any measure will be aggregator networks.  The best example for this is display advertising.”  Indeed, networks have an unmatched ability to scale but can also crash to the ground awfully fast.

The low margin is the least of their problems; differentiation and defensibility are.  Blue Lithium and Right Media hit jackpots by selling to Yahoo!  But those who didn’t sell (Tribal Fusion, Valueclick) suddenly found themselves under pressure from search advertising on performance and video on branding.

Content Networks Have Little Differentiation

Similarly, aggregators gather videos from content providers, sharing ad revenues.  iFilm (sold to Viacom, renamed Spike), Guba, Grouper (sold to SONY, renamed Crackle), Revver, YouTube (sold to Google), Veoh, DailyMotion, Metacafe, Viddler, blip.tv, are all vying for content, audiences and dollars.

YouTube is master of this domain.  Hulu is giving YouTube a run for its money, but the business model is anything but certain and its long term exit strategy is murky (Disney, News Corp. and NBC Universal/Comcast are shareholders but also competitors).

Ultimately, ad and content networks operate in a high-risk, winner-take-all game.   For publishers, it’s a lower risk world.  Consider the two acquisitions News Corp. made in 2005: Rupert Murdoch paid more for IGN ($650M) than for MySpace ($580 million), but MySpace’s subsequent growth made him look like a genius (for a while).  Today, MySpace is searching for its raison d’etre while IGN treks along as an unstoppable force in its sphere.

The Myth of Hyper Distribution?

In online video, producers are agnostic to distribution channel or platform.  To reduce risk, they diversify distribution, but the jury’s out on whether hyper distribution bears fruit.  Hyper distribution refers to syndicating one’s content as broadly as possible with little or no restrictions.

When it comes to generating revenues, is hyper-distribution wise?  Not according to Chris Pirillo, a prosumer video producer who leverages video to promote his empire but only counts YouTube as a commercial platform: “YouTube offers the largest audiences and generates most the revenue.  If you’re not YouTube, you have challenges in creating value for content producers”.  If that changes, look out for Freewheel, which according to CEO Doug Knopper allows “media companies and content owners to be able to monetize their video libraries across multiple channels and devices”.

Advertisers Follow Audiences…

Ex-Disney CEO Michael Eisner doesn’t pretend to know how the industry is going to play out, but he’s got no doubts what the end result will be: “I don’t know if the growth in content made for the Internet will be evolutionary or revolutionary, but it can’t not happen: a death march has been going on for other media who are in trouble because there is a more efficient way to share content around the world with the Internet.”

Business Models Take Time to Develop

Eisner made his fortune in television.  One VC who’s made his online has another opinion.  In Fred Wilson’s influential 2005 post “The Future of Media (aka Please Take My RSS Feed)”, he suggests to:

1 – Microchunk it – Reduce the content to its simplest form.
2 – Free it – Put it out there without walls around it or strings on it.
3 – Syndicate it – Let anyone take it and run with it.
4 – Monetize it – Put the monetization and tracking systems into the microchunk.

In theory, in the future when video streams monetize the way search queries have (whereby a search query is always associated with some kind of paid listing) then perhaps Wilson’s thesis will prove right.  But in practice, at least in the five years that have passed since the post, it’s been a recipe for financial disaster.

Hyper distribution is great for promotional purposes but not necessarily for commercial purposes.  Marketers do pay more attention as an audience grows, but they also pay a premium for scarcity and exclusivity.

This is the fundamental conundrum facing new media producers who rely on hyper-distribution to build brands and audiences but who weaken their pricing power and ability to secure guaranteed dollars by giving away their videos.  This can work if you can build ad-supported businesses, but that takes time and money.

Today, a few new media producers have managed to build ad-supported businesses, namely Revision3 and Next New Networks.  But between the two, they have raised over $30 million in venture capital.  Most producers don’t have that luxury.  For those others, I recommend creating content that other media companies will pay for, to buy them enough time to build a syndication business and eventually, a fully ad-supported business which commands the large ad dollars.

An imperfect but useful analogy I use is the banking model, where retail, corporate and investment banking fees can create a large business.

This diversified strategy provides:

• a safe income stream:  licensing, like retail banking, provides a recurring and non-volatile revenue base.
• a growth business: syndication, like corporate banking, requires other companies in the ecosystem to do well.  This can provide higher CPM rates by placing content in the right context.
• a wildly lucrative stream: advertising, like investment banking, takes time to develop, is speculative and seasonal, and risks drying up abruptly.  Notice how advertising revenue spikes each fourth quarter, for example.

The reason why I place content producers in the highest Profitability circle over time  in the first chart above is because only they can build such a business.  (The Profitability Index represented in the chart takes into account operating margins and total return on investment, including likelihood of a liquidity event).  And, yes, I am completely biased, since this is the kind of business I am trying to build with WatchMojo.  Aggregators and networks are solely advertising based businesses; just ask YouTube who generated $10,000 in a paid model test, even though it can generate billions in simpler ways.  Video advertising will be a bigger business, but not necessarily a higher-margin business.

Video will be Everywhere: on all Websites

Video on the Web is no longer just about entertainment.  It is also about marketing, instruction, and conveying information of all kinds.

• Content bellwether Wikipedia announced it will be rolling out videos soon enough.
• e-Commerce leader Zappos encourages users to submit their video experiences which increase sales 6% to 30%.  In 2010, it will create 50,000 videos.
• It won’t be long before organizations feature their accountants, lawyers, management, VCs in videos too.

Video will be Everywhere: in Ads

Videos won’t simply be on all websites; video ads will converge with rich media and display banners.  Publishers and ad networks will swap out low yield ad placements for videos that sell at a premium.  Rupert Murdoch is right to say that there isn’t enough advertising to make all publishing online profitable, but if you insert a video-enabled ad where a display banner exists today, maybe it will become more profitable, as video rates tend to generate a tenfold premium over display banners.  Of course, the flip side of that argument is that if video ad inventory lost all scarcity as display banners have, then it rates would also see a steep drop.

Video is the Anti-Search

Google’s dominance of the Web today stems from a perfect storm.  Search benefitted from low expectations.   Whereas Google’s competitors threw in the towel to focus on portaldom (or outright handed them the business), online video companies’ war chests seemingly have no bottom as they wage the war for the online audience.

With YouTube being a unit of Google, it’s hard to compete being a pure video aggregator.  Those who have tried are flailing badly.  Yet video’s expectations have always been high and will only get higher.

History Repeats Itself

Video will follow search in two ways though.

Search is software and Google is the only successful ad-supported technology company.  Video is media, which has a natural disposition to embrace ad-supported models.  As such, advertising will monetize video streams.  In fact, as large ad agencies and marketers shift online, they’ll embrace branding campaigns and push video advertising could eventually top search advertising.  Once that starts, online advertising will surpass television, it’s already happened in the UK.

Search for The Leading Ad Format

Everyone agrees that video advertising will be huge but what will the prevailing ad format be?

Stakeholders are obsessed with finding the ad format likely to follow television’s 30-second ad spot and search’s paid listings.

What might lead the way?

Pre-rolls are the equivalent of pop-ups (and mid/post rolls the equivalent of pop-unders) in that users hate them, but unlike pop-ups, I actually think pre-rolls won’t disappear, mainly because

• They’re the most in-demand ad format (according to Brightroll CEO Tod Sacerdoti)
• It is easier to include a pre-roll when you’re syndicating to other websites and platforms (says blip.tv co-founder Dina Kaplan)
• But largely because they’ll get more user-friendly: the 30-second ad will make way for 5-10 second interactive pre-rolls (SpotXchange CEO Michael Shehan).

However, there will always be properties which will forego pre-roll revenue to improve the user experience in order to build audiences, and all else being equal users will migrate to those sites.  So I’m not sure the pre-roll will remain all that ubiquitous.  The other problem with pre-rolls is lack of attention.  When a pre-roll starts, I tune out and look for my headphones or go grab a coffee.

That’s why I like the contextual display banner (and not necessarily the companion banner).  A companion banner comes bundled with the video pre-roll, but sits alongside the video  A contextual banner comes without the pre-roll.  Whereas most banners disappear quickly next to text with one downward scroll of the mouse, alongside a video player, that banner becomes quite valuable and top-of-mind since people are just staring at the video.

We’ve also seen the rise (and fall) of overlays, which is basically an expanded Picture-in-Picture (PIP) format; we know how that fared.

Of course, content producers are also salivating over branded content (more than product integration and product placement, the brand becomes central to the story) or outright sponsorships.

Finally, there’s the Web’s favorite offspring: the viral video.  Viral video is not an ad format, of course, but it is not quite branded content nor is it supported by ads.  As these become more common, achieving success with content alone becomes a sure-fire recipe for failure.  All content will need to be supported by a media buy or some kind of promotional push.  After all, on TV you spend millions creating an ad but you need to buy media spots to promote it.  It’s not going to be that different online.  Yes, it’s a meritocracy, but it’s a loud, cluttered one.

KISS: Keep It Simple Stupid

There won’t be a single dominant ad format but the holy grail will prove simpler than expected.  It always does.

Remember Don Lapre’s infomercials?  He would go on and on about placing “Tiny Classified Ads” in newspapers.  I never thought much of those ads until Google’s adoption of (essentially) little text ads next to search results led to their explosive growth.

Sometimes in business, the solution is simpler than you can imagine.

Pingdom caught the fact that the light has gone out for the websites Revver (which we’ve declared dead or at least struggling for life before), LiveUniverse.com and PageFlakes, but missed other unreachable properties such as Peerflix. The only websites that seem to be holding up for the time being are LiveVideo, Yikers, Glumbert and MeeVee, but I wouldn’t hold my breath for those to stay online for much longer either.

Update: per comment below, PageFlakes is back, may I suggest you back up your data if you’re an active user?

Update 2: Revver’s back too, with a message saying that they’ll be down 5PM PST January 28 but they’ll be back up in the evening. We now know that didn’t happen.

Last Friday, CNET got in touch with Greenspan who said the downtime was simply a part of migration to a new data center in LA that has “lots of servers”. He added that the sites should be back up in the next few hours.

They didn’t, and they most probably won’t. We’ve heard that “migration” story from Greenspan before, and it turned out to be equally bogus then. And although Greenspan hasn’t gotten back to us yet regarding the most recent downtime problems, we’ve heard from multiple sources – including someone who has sold his company to Greenspan in the past – that LiveUniverse has simply run out of money and imploded, which isn’t much of a surprise to us.

For more proof, see this Twitter message from a laid off employee), read this detailed story from yet another person who sold his company to Peerflix / LiveUniverse or turn to the gripes of people owed money.

As far as we’ve concerned, LiveUniverse is in the deadpool.

But a quick glance on Twitter shows something is definitely up.

What’s worse than uptime issues, though, is that the company apparently has some trouble meeting payments. Rumors are circulating that employees haven’t been getting their paychecks on time either, adding to the assumption that Revver is now on its last legs.

Revver, founded in 2004, was one of the first video sharing sites to start sharing revenue with content creators. In September 2007, everything looked rosy when the company said it had managed to pay $1 million to video producers and their affiliates over a period of one year. By February 2008, the company was collecting debt, laying off staff and reportedly put itself up for sale.

Revver was in fact acquired nearly two weeks after our post, by MySpace founder Brad Greenspan‘s LiveUniverse for “about $5 million“. Revver had raised a total of $12.7 million in two rounds from Comcast, Turner, Draper Fisher Jurvetson, Bessemer Venture Partners, Draper Richards and William Randolph Hearst III.

But now it seems Revver is on the ropes once again, and may be headed for the deadpool soon. I also can’t help but notice that the LiveUniverse website doesn’t even mention the social video property anywhere, not even in its media kit.

We have an e-mail in with Greenspan asking for more information and will update the post if necessary.

Update: Greenspan checked in and says they are in the middle of major migration from a CDN/provider to a tier 1 & top technology provider which “should make the quality of Revver videos displayed better then ever” (could take a few days).

No word on the complaints about actual downtime and delay or lack of payments to content creators yet, so we’re sticking to the story.

Pandora.TV launched in 2004 and has grown to become the “YouTube of Korea,” ranking as the countries 24th most popular site according to Alexa (comScore data is not available) with 20 million monthly unique visitors, 2.5 billion monthly page views with 2.5 million hosted videos. Notably the company has taken $16 million over two rounds from Altos Ventures and DCM, said to be the largest foreign investment made in a Korean internet startup.

Pandora.TV offers a mix of YouTube style videos and Live streaming. Like YouTube, videos can be embedded, voted upon and comments left on each page. A key selling point is unlimited video storage.

As of today Pandora.TV is now available in English, Chinese, Japanese as well as its native Korean. New features rolled out with the international expansion include HD quality video playback (H.264 codec support), multiple video upload (up to 5 files simultaneously), unlimited category creation and site widgets. Pandora.TV has also claimed cross-browser support as a new feature, however the Live Streaming service requires a download to view and stream that is only available to Windows users.

According to Ars Technica, the figures show women aged 18 to 34 were twice as likely as men of the same age group to watch network TV shows streamed from sites such as CBS.com or Hulu, where as men aged 18 to 34 were over twice as likely to check out user-generated video sites as women (YouTube and others.) The figures relate only to streamed content, and therefore excludes iTunes and downloaded content from P2P services such as BitTorrent.

Even if we discount the figures fully (Ars suggests men are more comfortable with BitTorrent therefore MSM content is not counted correctly) its a strange anomaly. Why would women prefer professional content and men preferred user content? and is it possible to obtain an answer without being completely sexist in a conclusion?

No doubt Nielsen and competing services will test the theory in the coming months. If it’s proven to be true, it may well affect the focus of sites in both spaces, and will most definitely affect the types of advertisers these sites attract.

(image credit: icanhascheezburger)

CNET is reporting that video sharing site Revver is trying to sell itself for $300-500k, a measly price given its total funding of $12.7M.

The company apparently has fallen on hard times, with over half of its staff leaving in the last 18 months and having accrued a debt of $1M. So far the company has had no luck finding a buyer even at such a low offering price. Both LiveUniverse, a “network of entertainment Web sites”, and Microsoft’s Soapbox (i.e. MSN Video) have considered buying Revver but neither has bitten.

Is Revver on its last legs? It sure looks like it. Let us know in the comments if you have any more information regarding their situation.

Time for another roundup, and this one coincides with a notable first-year anniversary: that of Google’s $1.65 billion acquisition of YouTube, confirmed on October 9th, 2006.

Since then, the name “YouTube” has become virtually synonymous with “online video sharing”. According to Comscore, the website maintains a sizable lead over competitors with 205,593,000 unique visitors per month. Second-place Yahoo Video trails with 48,026,000 visitors. But must YouTube remain the clear winner in the online video space? While they have certainly captured the largest audience – which may in the end be all they had needed to do to secure their position – we shouldn’t underestimate the many other companies vying for mindshare.

Even if YouTube remains the destination of choice for the vast majority of consumers, producers ought to take a serious look at the alternative services. They often support more file types, bigger uploads, and higher resolutions. They also place fewer restrictions and provide an array of features simply overlooked by YouTube. That said, a few of these services are mere YouTube clones and hope to follow in YouTube’s footsteps by providing very basic features.

These are the services we looked at: blip.tv, Brightcove.tv, ClipShack, Crackle, DailyMotion, Sony eyeVio, Google Video, Megavideo, Metacafe, Motionbox, Revver, Spike (ifilm), Stage6, Veoh, Viddler, Vimeo, Yahoo Video, and YouTube.

Since they are all about 80% the same, I’m not going to go through each of them one-by-one at length. However, there are some overall trends that ought to be pointed out, as well as some key differentiators. To get into the details as to how all of these websites differ, check out the comparison chart we’ve provided above. You’ll notice that there are some gaps, so please email me if you can help us fill in the holes.

First of all, only YouTube, DailyMotion, and Metacafe appear to place any hard restrictions on video length. With the rest, video lengths are determined indirectly by file size restrictions. While YouTube and several of these sites place the file size cap at 100mb per upload, others place it higher at 250mb, 500mb, or 2000mb. Veoh places no limitations on file size, but they recommend you use their desktop player for files over 100mb. If you’re willing to fork over some cash for a premium membership, Brightcove.tv and Motionbox will also let you upload files of any size.

While YouTube allows users to upload files only formatted as .WMV, .AVI, .MOV, or .MPG, other services accept a much greater range of file types. If you want to make your life easier, however, get into the habit of encoding in .MOV (Quicktime) and you’ll be welcome at almost all of these sites.

When it comes to video quality/resolution, it’s not perfectly clear how these services compare, because most of them don’t state their video bit rates or explain their transcoding processes. However, several of them clearly blow YouTube out of the water. Stage6, a DivX-based service, and Sony’s eyeVio, a Japanese-only service, support the most stunning video quality. Videos hosted by Veoh and Crackle also look very sharp.

Out of all these alternative services, blip.tv stands out as the most professional video sharing solution. The website and player are cleanly designed, they accept perhaps the widest range of file formats, they will automatically syndicate your videos to many other websites, and you can choose to place midroll, postroll, adjacent, and overlay advertisements in your uploads. Additionally, you can track your shows’ statistics quite closely and allow users to download your videos. I could go on and on about blip.tv’s useful features. The only major bummer with blip.tv is that you can’t seek ahead to points in a video using their Flash player.

It’s no surprise that shows like Rocketboom have decided to migrate over to blip.tv. We even decided to use them for our TechCrunch40 conference. And PC World agrees with us that blip.tv tops them all.

While we have a strong preference for blip.tv, the others have their own peculiarities that may make them more attractive to you. ClipShack, while mostly a YouTube clone, has an area where you can use a webcam to add movie, book, video game, and TV show reviews directly to the site. Crackle serves as a talent discovery system through which amateur producers can win a chance to pitch ideas to Sony and other media executives.

Dailymotion, Metacafe, and Megavideo support a wide range of languages. Sony eyeVio, which unfortunately doesn’t plan to roll out an English version, enables users to download videos straight to their PSPs, Walkmans, iPods, and mobile phones. Metacafe and Megavideo both have programs with which they pay content creators according to how many people view their videos. Motionbox, the most private of the services, has a video player with a unique filmstrip that can be used to visually locate segments in a video (they also provide a simple online video editor).

Revver provides a WordPress plugin so that video bloggers can upload and manage their content more efficiently. Veoh lets you both upload videos to other sharing sites and watch videos from all over the Web in its download client. Vimeo sports the best-designed website and a strong community feel. And Viddler’s player packs in a bunch of features, including the ability to leave comments in videos at particular points.

Since embeddable video players are the faces of these services, we have placed screenshots of them below (click to enlarge). We are also in the process of uploading a sample video to each of these websites so you can compare their video qualities. Links to these videos can be found in the comparison chart.

Revver splits revenue 50/50 with video creators after paying 20% off the top for video distributors (sites that embed the video become distributors). This implies total revenue of $2-2.5 million in the last year depending on if there are distributors to be paid. Of course, if they have sweatheart deals with some content providers, that revenue total could be lower, even significantly lower.

Revver was one of the first and currently is one of the few hosted video sites helping monetize social video for independent publishers. Metacafe currently has a producer rewards program where they pay $100 per 20,000 views. Dailymotion and Youtube are expected to pay their users through advertising revenue as well.

There are a couple key issues they’re all struggling with as they try and generate the greatest amount of ad revenue. There’s still some uncertainty about where to put the ads (pre/post/interstitial?). Even the type or length of the ad is up for debate. A recent study found longer ads were more effective at branding, while conventional wisdom has cast doubt on users sitting through the longer plugs.

After deciding on the format, determining the content of the video in order to generate relevant ads is yet another tough problem. It’s also a dire matter for big brands that don’t want to risk being associated with inflammatory content. Finally, these ad platforms will need publishers, advertisers and a marketplace to trade in.

Here’s a look at what people are doing in video advertising:

Definitely the team to watch, YouTube is treading carefully, experimenting with text ads running along the bottom of the video that users can click on for a full video ad. They’re going to be testing the system with some of their top content producers and word on the street is that the terms are pretty good. Revver splits ad revenue 50/50 with publishers. They run ads at the end of viral videos, which might mean that people are still paying close attention after watching the main content. However, this also means they lose some precious real estate to help drive traffic to other videos on their network like YouTube does. Revver filters the content themselves, tying in the appropriate ads. Similar to Revver, VideoEgg helps publishers deliver and monetize their video inventory. It’s a very hands on approach suitable for larger brands that have tight control over the quality and context of their content. They serve up over 20 million videos daily across their EggNetwork. Ads show up alongside lead ins to other videos as well. ScanScout’s technology scans each video and determines content, with ads delivered contextually to match each scene. They run text ads along the bottom of the videos based on context derived from audio analysis and user behavior.

They’re like adsense for video, tying contextual text ads based on the content of a video. It looks similar to what YouTube is aiming for. When videos play, Adap.tv digs up relevant Amazon products and Looksmart ads to populate an ad bar on the bottom of the video at key moments. They use tags and other meta data, as well as speech to text translations to find out what the video is about.

AdBrite was one of the first to overlay ads on videos with their InVideo platform. Adbrite has created an embeddable video player similar to YouTube. If we choose to show a video on TechCrunch, we can use this embeddable player, and at our option it will include Adbrite ads and our logo as a watermark. Anyone who takes the content and embeds it on their own site will show the same video, with the same ads and watermark. And all click backs on the video go to the original site.

The most interesting ad play, BroadRamp wants to make everything you see on your video a possible point of sale. See a t-shirt you like? Just click the video to buy it now. Tagging or programmatically generating the links to products from the video may not scale or prove too difficult. Their core business is still video content delivery systems, however.

Formerly Podzinger, Everzing searches audio and video. Since they don’t own the content they can’t insert ads on the video content, but their speech-to-text transcription means they can help solve the problem of finding out the subject of a video.

A video search engine like Everyzing, Blinkx analyzes videos speech and meta data to tease out the content of the video. They also claim to use visual recognition as well. However, Blinkx has also leveraged their technology to launch adHoc, contextual advertising based on the content of the video.

Another video search engine currently running in private beta, Cast.TV looks at a video’s meta data and surrounding links to determine more context around the video. We’ve been impressed with how well it works. They haven’t discussed plans to incorporate advertising, however.

Coming up with a kick ass, scalable ad platform solution for social video that satisfies the needs of publishers, advertisers, and viewers is only a piece of the problem. While finding the most effective format will take a lot of testing until consumers reveal the most effective methods, the platforms will also need video content to monetize. Since well defined video properties with targeted content can work with sponsors on established video ad networks, the ideal market for these platforms remains effectively monetizing the jumble of amateur viral video floating around on social networks and YouTube. However, YouTube, which currently owns the lion’s share of video on the net, seems to be taking their time developing the solution in house.

That leaves becoming a destination, partnerships, or acquisition as possible outs. Video search sites like Blinkx and Everyzing are currently monetizing their search pages, but can’t take full advantage of their platforms by embedding ads into the content they link to. While these sites offer deeper video search, existing as a destination site is also a tough path that goes up against established web properties like Google, Yahoo, and AOL. In a slightly different way of going it alone, AdBrite has been going directly to publishers with their InVideo player. Adap.tv has been testing out partnerships, trying their platform out on MetaCafe.

As with most ad platforms, advertisers and publishers will be trying them out for effectiveness. In the end, the startups that can deliver the most return to these two will win out.

The millions of YouTube videos is a huge inventory that finally gives advertisers a real reason to start investing in the creation of video ads and begin using Google AdSense Video.

I believe there will be three parties seeking compensation:

• Video content owners — owners of original content. (An audio “fingerprinting” copyright system has been in the works for a while, which will match videos up with content owners, in order to compensate audio/video content owners.)
• Video content creators — users that mash-up content into custom creations.
• Publishers — user/company that displays a video on their website to visitors.

One of the many questions is whether ads will appear on YouTube videos that are displayed on websites outside of YouTube.com. If I’m a publisher, I’d want the option to make revenue on a video I publish — but if I’m a publisher (user) on MySpace, MySpace is the ultimate publisher. MySpace is loaded with YouTube videos, but MySpace doesn’t allow external advertising on their website. Also, MySpace has been blocking external widgets randomly and without explanation, so I would imagine that YouTube wouldn’t take a chance by displaying ads in videos that are seen on MySpace pages. Google is already in bed with MySpace, which could lead to rev-share discussions of ads within YouTube videos that stream on MySpace — and also ensure that YouTube doesn’t ever become an unexplained banned victim of MySpace.

YouTube competitors have worked to differentiate themselves by compensating video content creators, but once YouTube enters this game with their top-dog status already — I question what would make a user go to a lesser-visible video site such as Revver, Guba, Metacafe, etc. Competitors have been struggling of recent — Revver lost two founders and Guba lost its’ CEO and two executives.

Editor’s Note: This post was written by guest contributor Steve Poland, whose blog Techquila Shots brainstorms web start-up ideas.

This is the kind of partnership we’ve seen fomenting in previous deals like PodShow’s Sirius broadcasts, the podcast fueled radio station KYOU and Rocketboom on Tivo.

Revver is very 2.0, with post roll still frame ads, revenue splits for publishers, social bookmarking integration and an API. Unfortunately, they’ve had a tough time building the kind of critical mass that YouTube has. Aside from a handful of high profile video series (Ze Frank, Ask a Ninja, Lonelygirl15) there’s not a lot of good content on the network. Perhaps it’s the revenue sharing that brings less authentically creative and more profit driven amateurs to make up the bulk of the content at Revver. I don’t know. A TV partnership may or may not help.

This kind of partnership is in some key ways different from the trend of paying top users. It may be more effective in terms of quality to glean a select few content creators and pay them well than to skim from a large set of content and pay many people only a little. Blogburst (our coverage) appears to be taking the à la carte approach for text content.

Only time will tell which approach will work best. For now though, classic British comedy will face challengers at least larger in number than ever before.

As social news works itself out, advertisers seek to get into places like MySpace and YouTube and the line between amateur and pro continues to blur – there’s a number of things unfolding that could change media in the same way as bloggers at the Democratic National Convention went down in history as a key turning point for that medium. When Yahoo! bought Flickr they said that one of the system’s biggest appeals was that users built the community for free. According to Calacanis’s logic, that’s not be the direction things are moving in these days. There’s a lot of evidence to support that opinion; these sites are being made viable by the work of rewarded top users combined with high quality, very unorthodox corporate advertising.

To put the recent debates about Digg (our coverage) and Netscape (our coverage) in context, here’s an overview of some of the key events unfolding right now that are blurring the line between amateur users and professional content producers.

Here’s some bullet points for this meme:

• some top Digg users feel unappreciated
• Netscape’s hiring top contributors is helping grow page views fast according to Calacanis
• a top YouTube user turns out to be a professionally produced work
• YouTube users are going pro and pros are succeeding in YouTube
• MySpace isn’t a training ground anymore – it’s a sales platform
• the Revver video community has stars of its own and they’re getting paid
• people hate Paris Hilton.

Details below.

YouTube is the most interesting site right now concerning these questions. Last week one of YouTube’s most watched video makers, Lonelygirl15, was revealed to be the work of the powerful Beverly Hills talent agency Creative Artists Agency – not a stereotype affirming, sheltered 16 year old girl making and posting videos behind her parents’ backs. The controversy has been huge; was Lonelygirl15 a legitimate work of pre-commercial art or a manipulative attack on the authenticity of community media sharing? Danah Boyd has some of the best blog coverage of the event and says that the New York Magazine has the best mainstream coverage so far.

The community response has ranged from Bravesgirl15‘s attempts to emerge as a leader in condemning the company behind Lonelygirl to long time site leader Renneto recording what appears to me to be a piece of faux indignation smartly following the lead and ethos of Lonelygirl. Still others have posted a mock press conference with a purple monkey puppet that resembles Lonelygirl’s and countless other less interesting replies. This is the discussion driving YouTube right now and it’s important to the future of all of these kinds of sites.

While the headline smashing YouTube/Paris Hilton deal has been an unqualified flop and provoked a substantial backlash on the site, Smirnoff’s Tea Partay music video is at least very compelling if not a success. Site favorite Brookers has signed a deal with NBC after making less than 30 videos, many of which were her lip syncing to commercially copyrighted songs.

Arguments that copyrighted video pilfered from off site was the only thing sustaining YouTube seem less solid than ever, but so do arguments that commercial activity on the site is impossible to pull off.

MySpace has become the new companion home page for YouTube stars, a major advertising platform via the Google deal that will go into effect later this year and a path direct to market for musicians. While the Arctic Monkeys rode MySpace success to big record sales off-line earlier this year, these new developments indicate that social media sites have the potential to be more than just training grounds for mainstream success.

Not content to concede viral video to YouTube, competitor Revver has stars of its own and a revenue sharing program based on still image ads at the end of each video. Ad based revenue sharing is unlikely to be sufficient incentive for the vast majority of any system’s users, but that may not be the case for a site’s biggest stars. Those stars may be incentivized to use a particular service and pull in a large audience of viewers who are also long tail content producers themselves; they could in aggregate monetize well for the site. Ze Frank has shown on Revver that news video blogs don’t have to be performed by boring, pretty girls in order to build a large audience. Even Steven Colbert has been accused of lifting several jokes from Frank. Ask A Ninja, another project now on Revver, is working on a commercial movie with Viacom’s Atom Films and selling merchandise on their site.

Of all of these examples, the Lonelygirl15 controversy is probably the most timely and interesting, but I think all this sheds light on some of the recent Digg/Netscape debates. As my friend Alex Williams puts it, viral media sites are the new Star Search and recognition of top users, be it through financial compensation and/or status, could be a key driver in making these sites viable. And conversely, commercial activity is possible in these communities but the format it can take is still up for debate: Paris Hilton no, Tea Partay yes, but for short campaigns and Lonelygirl15 maybe – I don’t think there’s consensus, or any indication that model could be reproduced well enough to be sustainable. As a proof of concept though, it was fascinating.

Advertising in these spaces well takes a whole lot of skill and we’ll see far more people fail than succeed, but occasional success could help build tolerance for the bulk of attempts instead of a wholesale rejection of commercial engagement with viral media communities. Companies are struggling to find people capable of pulling off advertising in social media spaces. Second Life is a whole other can of worms.

Who’s going to drive these sites and make them commercially sustainable? Top users are going to be an important part of it, and they will want to be rewarded for their work. It’s hard work to do what these people are doing and recognition, if not payment, is proving itself to be very important.

I’ve taken a look at as many of these services that I could find. The most well known is YouTube, which we profiled in August and which recently raised venture money from Sequoia.

But there are at least eight others worth looking at as well. In addition to YouTube, these are CastPost, ClipShack, DailyMotion, Grouper, OurMedia, Revver, Vimeo and vSocial.

Instead of writing individual profiles on each of these, I’ve created a quick chart that give a basic overview of the features. I’ve included only those companies that provide a web-based (v. client) service that hosts the videos on your behalf. Because of these requirements, great services like VideoEgg (profile) are not included.

Here’s the chart. I’ll update it as needed.

Most of these companies convert video to Flash. This reduces file size significantly and also allows most platforms and browsers to easily view the content. Two, Vimeo and DailyMotion, convert files to quicktime instead. A couple do not convert the files at all. One benefit of those services which do not convert is that the files can be downloaded by others, emailed, etc. QuickTime format can also be downloaded.

One service that has a unique feature is Revver. Much like FruitCast for podcasts, Revver will auto-insert advertisements directly into your videos and share revenue with you.

A couple of additional notes. Grouper has not launched their video publishing product yet. When it does launch there is a good chance it will involve a client download which would remove them from this list. Also, while I’ve noted which services allow tagging of videos, there are a wide variety of tagging options within these services, and many of them also provide comments, rankings, etc. and which are not noted in the chart. Finally, the tools to allow blogging, friends lists and other sharing are varied and more useful in some products than others. Which product is best for you depends on what types of features are most important to you.

UPDATE: I’ve updated the chart above with more information. People have left great comments and have included new companies I’ve missed. If you are associated with those companies, please email me relevant information and I’ll include it in the chart. The most interesting comment is from Vinu, who tells us that he heard a rumor that Flickr will be adding video support soon. That would have a significant impact on this market, of course.