The long, sad tale of video site Veoh seemed to be in its final chapter when founder Dmitry Shapiro declared the company was filing for bankruptcy back in February. The copyright litigation with Universal Music Group proved to be too costly and too distracting, even though Veoh won a summary judgement in its favor. But hours before Veoh was actually about to file the bankruptcy papers, an unlikely suitor appeared: a seed-stage startup in Los Angeles called Qlipso.

Qlipso ended up buying the assets of Veoh, including its Website, filtering, recommendation, and backend technology, video library, advertising deals, and still-substantial audience. ComScore estimates that 14 million people a month still visit Veoh. Qlipso, on the other hand, is a startup developing a virtual room platform where people can share videos and other Flash media, while chatting via text, video chat or avatars. I spoke with Qlipso CEO Jon Goldman by phone today to ask what possessed him to do the deal.

“This is an exotic venture strategy,” he admits, “Qlipso is an early-stage R&D company transforming into an business with scale and audience.” Qlipso gains an instant audience, a better-known brand, and relationships with advertisers. Goldman thinks the deal will help to establish Qlipso faster than he could have done on his own. “I think we have accelerated this by years,” he says. “We have a 5-person sales team in NY, a large audience, it is completely transformational.” If Veoh had gone ahead and shut down the site, he notes, there would have been no deal.

Goldman would not disclose the price, but the asset sale was funded by Qlipso’s main investor Jerusalem Venture Partners. “This is a significant bet for an early stage venture capital fund,” is all Goldman will say. Over the years, they’ve put a few million dollars into Qlipso, and injected multiple times their previous investment to finance the acquisition. Part of the cash infusion will also go towards the capital required to keep operating the site. Whatever the acquisition price, it was a fraction of the $70 million investors as varied as Michael Eisner, Goldman Sachs, Time Warner, Intel, and Spark Capital put into Veoh over the years. The proceeds will now be split up among creditors and, if anything is left, the investors.

The Qlipso virtual rooms will become incorporated into the Veoh site, which will also be used to distribute more individual downloads of the Qlipso software. Watching videos on Veoh will become more social. You will be able to invite your friends to watch videos in a virtual room, or join existing rooms. Whether or note people actually want to watch videos this way remains to be seen, but now Qlipso has a large audience to test its technology on. Veoh’s demographics are also skewed towards young males who like sci-fi and anime, a group Qlipso is targeting. Also reached by phone Veoh founder Shapiro says, “I am pleased to see that Veoh wil be in operation.”

How much do you think Veoh was worth?

Editor’s note: The following guest post was written by Ashkan Karbasfrooshan, founder and CEO of WatchMojo.You can also read his series on the state of Online video (Parts I, II, III, and IV) video..

Yesterday’s final implosion of video site Veoh, which declared bankruptcy after burning through $70 million of venture capital, was a long time coming. A lot of so-called smart money went into Veoh: investors included Goldman Sachs, Time Warner, Intel’s venture arm, Spark Capital and former Disney CEO Michael Eisner. And it was hardly an isolated incident. Joost, another high-flying video startup launched by the founders of Skype, went through $45M in VC money before ending up in a fire sale.  Who’s next?

More importantly, why is so much venture capital that funded video startups going down the drain when the number of videos watched on the Web is going through the roof?

Nowadays, it is fashionable to discredit VCs as financial engineering hacks with no operational talent who lack the moral compass required to lead people; but that would be unfair. VCs, it turns out, are neither the problem nor the solution: good ones might offer more than cash, bad ones will kill your business.  And once killed, they’ll blame everything and anyone but themselves.

Fish Out of Water

Last year I was speaking about raising capital with a fellow CEO, Brightroll’s CEO Tod Sacerdoti, and he mentioned that the “video industry is more media than technology”, to which I added, “that is why VCs come across like fish out of water”.

Indeed, most VCs tend to lack any meaningful background in advertising, publishing, sales or media.  Selling software doesn’t cut it.  Building chips is irrelevant.

In fact, the very same things that make technology companies successful are often weaknesses and even threats to media companies.  For example, a tech company’s contract for recurring licensing fees is not as attractive as a series of contracts for recurring advertising deals. This merits a post in of itself, but the kinds of things that VCs were drawn to in video have all become commodities, namely: video aggregators, content delivery networks and content management systems, which are capital intensive, low margin areas always at the risk of getting cancelled and shifted to a competitor.

Making things worse is this “crazy ass backwards” investment thesis that they should invest in 10 companies and watch seven burn to the ground, hope that two do “ok”, and pray that one will be a “grand slam”.  Forget the theory of diversification, which underpins all of finance, VCs keep aiming for the fence and let’s face it, finding winners in business is as hard as finding them in Hollywood.  You win with singles, doubles, triples and occasioanlly home runs. basing your strategy on grand slams is futile, which takes us to VCs odious track record in online video.  Online video startups tend to fall in one of the following categories, with some overlaps:

1. Content management system (CMS) platform technology companies
2. Advertising creation and management companies
3. Content aggregation and distribution
4. Video file hosting and sharing
5. Video content editing
6. Content producers
7. Content delivery network (CDN)

Where are the grand slams other than YouTube?  There aren’t any.

The Elusive Media VC

True media VCs just don’t exist.  One explanation could be that most high ranking media executives who were working in big media with high salaries but little or no equity, never experienced the massive paydays that would give them a path to investing their own money and subsequently setting up a fund to invest on behalf of others.  There are exceptions, of course.

But the entrepreneurs who have made fortunes in media tend to reinvest in their own empires rather than dole out the money to potential startup competitors.  Media moguls like Rupert Murdoch, William Randolph Hearst, Sumner Redstone, SI Newhouse and the like who never sold out retained their earnings and built empires.  Once they became the Establishment, it made little sense for them to finance the disruption.

Mr. Murdoch (who bought the company that bought my last company) bought MySpace when it was convenient, generated a windfall from the Google deal, and now that its fortunes have soured, he is divesting from the medium: first Photobucket, then Rotten Tomatoes.

Conversely, most VCs were technology founders and executives who sold companies and came into cash.  They set up or joined VC funds to reinvest their money and continue the cycle of disruption.

The Web is Entering a Period of Massive Content Consumption.

There seems to be a massive wedge between media and technology.  One side doesn’t get the other and the result is wasted investment dollars.

“There’s no one in the record company that’s a technologist,” Universal Music Chairman Doug Morris once explained. “That’s a misconception writers make all the time, that the record industry missed this. They didn’t. They just didn’t know what to do. It’s like if you were suddenly asked to operate on your dog to remove his kidney. What would you do?”

Well, alternatively, VCs have no clue where the advertising money will go in media but all VCs seek to invest in the Google of Video. Incidentally, Google’s initial business model was based on licensing its search technology, a unit which generated hundreds of millions of dollars.  But today, Google is foremost an ad-supported business.  However, it’s one of the only successful ad-supported technology businesses in the world.

Google lucked out by benefitting from a perfect storm and is now limited by its free, ad-supported worldview (Apple understands that if there is one thing people love to do is actually spend money – but again, separate post).

Regardless of whether the Internet will be larger on Mobile or PC, the nuts and bolts are starting to matter less than the content that is consumed, and how that content is monetized.  More likely than not, the model will be advertising based.  Today, fickle media companies have less faith in ad models, but consumers continue to shun paying for content.

Regardless, VCs keep investing in the next crapstr, whereas they should be investing in content, which is missing piece for advertising to take off in online video.

Content is King

“The real barrier is content and the model necessary to make more of it.  Cable TV suffered from this same fate early on”, states Broadband Enterprises’ Matt Wasserlauf.

We’re still in the early days of online video content and history is repeating itself.  The film industry initially recreated theater and added a camera to record plays; early TV recreated radio and added a camera as well.  Online video content has much room for improvement, but what is missing is the kind of investment required to create compelling content.  VCs keep throwing out cliché after cliché and just show their lack of understanding of that fact. Sure, some of the aggregators such as Veoh did scale quickly but it wasn’t all that defensive.  Despite all of this, VCs seem to be making all of the same mistakes over and over again: investing in the technology and not in the content.

Photo credit: Flickr/Umberto Salvagnin

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.

As video sites on the Web struggle to find a business model that will pay their mounting bandwidth and storage bills, many of them are trying to reinvent themselves. Veoh, which has raised a total of $70 million, had to cut 35 percent of its staff earlier this month and the site seems to be losing steam. Unique visitors are down 18 percent from their high a year ago to 15.2 million worldwide, and users of its desktop app VeohTV are down 40 percent to 7.2 million worldwide, according to comScore (see chart below).

Founder Dmitry Shapiro is now back as CEO and he is pouring the company’s remaining energy into a new product launched six weeks ago called Video Compass (read our review). Since launch, it has been downloaded 800,000 times, and is currently being downloaded at a rate of 25,000 a day. Video Compass may amount to a Hail Mary pass to try to save the company. It is an attempt to spread video search across the Web by bringing you search results when you don’t even know you are looking for videos.

The way it does this is through a browser add-on for Firefox and Internet Explorer that is triggered whenever you do a search on a growing list of sites, including Google, Yahoo, Amazon, Craigslist, Wikipedia, and even YouTube. In the past few days, it just added Twitter Search, MySpace, Hulu, DailyMotion, and Metacafe. Up next will be Flickr, Photobucket, and Facebook.

Whenever you do a regular search on these sites, a ribbon with Veoh video search results pops down triggered by the same keyword you are searching. For instance, if you are searching for “police” on Amazon, a bunch of Police music videos appear along the top ribbon, along with some car chase footage. You can cycle through the videos by clicking an arrow to see more results in the ribbon or you can click on related tags along the top (“Sting,” “crime,” “japanese police”) to refine your search.

If you click on any of the thumbnails, a semi-transparent player opens up and lets you watch it in-situ, without necessarily going to Veoh.com. When you are done, you close the window and you are back at where you left off.

I’ve been testing Video Compass for the past few days, and the video results pretty decent. I find them to be a bit redundant on other video sites such as YouTube, but they can sometimes offer better results on narrower video sites. For instance, try searching for “Moldova” on Hulu and you get one result, whereas the Veoh Video Compass bar turns up plenty of protest videos. And do a search on Twitter and it adds a whole different dimension to your search. Even searches on Google bring up more video results than occur naturally. And you can always turn it off if it starts to annoy you.

The big question is can Veoh create a business around a browser add-on? That all depends on how much of a habit people make of clicking on the Veoh video results and how good they are. Veoh has developed its own behavioral targeting technology which generates both video recommendations and helps target advertising. Shapiro tells me:

Today we are doing a pretty good job monetizing Veoh.com. We serve pre-rolls (at high CPMs), mid-rolls, overlays, and targeted display units. Our behavioral targeting engine lets us get higher CPMs than our competitors, while selling out more inventory. While I can’t share the exact numbers with you, I can tell you that our quarters are in the millions and every quarter has been a record quarter, although we are not cash flow positive yet.

With Video Compass, he can promote content from partners directly in the toolbar when people are conducting associated searches elsewhere on the Web. Movie trailers would be one obvious type of content to promote, but sponsored video ads of all stripes could be placed in both the results or during playback. There is also a lot of empty real estate around the player that can be filled with ads in the future. Finally, Shapiro is working on ways to drive users back to Veoh.com where the monetization model is more clear. So he is not giving up on his destination site entirely.

Relying on people to download his add-on, however, is a risky strategy. Not only does it require people to go out of their way, as more and more browser add-ons adopt similar triggering mechanisms, conflicts could emerge. For instance, Glue has a similar user interface, although it is not triggered by searches. But you can imagine a time when two different add-ons are both triggered and either one cancels out the other or the top of the browser becomes a mess. This is essentially the same problem people have with the new Diggbar and other Website framing mechanisms. They can create a lot of clutter instead of helping you cut through it.

In the world of Web video, either you are YouTube or you are in trouble. Today, well-funded video site Veoh laid off 25 people, the company confirmed today. The layoffs were brought on by a restructuring, as the company shifts focus away from its standalone site, says founder and now-reinstated CEO Dmitry Shapiro. Shapiro replaces former CEO Steve Mitgang. With both today’s layoffs and cutbacks last November, the company is now left with 45 employees, says Shapiro. We have added the latest round to our Layoff Tracker.

Shapiro says that the company is doubling down on its video search browser plug-in, Video Compass, in an effort to engage consumers with videos at times when they wouldn’t normally be watching them. Video Compass adds a video recommendations whenever you conduct a search on Google or elsewhere on the Web. Veoh adds over 25,000 new Video Compass users daily. Veoh’s standalone video playing site is having difficulty competing with the bigger players in the game like YouTube and Hulu. Still Shapiro maintains that Veoh’s site remains popular among consumers, generating more than 200 million video streams each month from content publishers such as ABC, CBS, ESPN, Viacom, and Warner Bros. Comscore says Veoh’s site had 15 million unique views worldwide in February 2009, down from 18 million last August, plus another 7.2 million for its VeohTV app, which has also been losing viewers (see chart below). Shapiro says that the site alone reaches over 23 million unique users each month.

So what went wrong? Shapiro says that the video search business model is still immature. He thinks that while video should be omnipresent in a consumer’s web experience, the ad model is still evolving. Shapiro is sure that advertisers will one day throw seven and eight-figure dollar amounts to advertise on video sites, but its simply not there yet. For that reason, Veoh is tightening its belt and trying to come up with new ways get consumers to watch videos. But getting people to watch videos online doesn’t seem to be the problem. It is getting advertisers to pay to reach those viewers.

Veoh is placing a big bet on Video Compass, which is a novel video discovery tool, but still has many glitches to work out. As we wrote in our review, Video Compass sometimes offers bizarre matches and appears only after the page you’re visiting has finished loading (so your Google search will finish, for instance, and only then will the Veoh ribbon pop in, shifting everything down a few centimeters).

Veoh has been on a rollercoaster ride over the past year. It is currently embroiled in a lawsuit with Universal Music Group, which so far seems to be going its way, marginally. Veoh has also raised significant capital ($70 million to be exact) from big-name investors like Goldman Sachs, Gordon Crawford and Time Warner. Shapiro says investors are supportive of the company’s redirection so far.

The two comScore charts below show worldwide unique visitors (for both Veoh’s site and its VeohTV app), and a U.S. comparison of Veoh.com to Hulu,.com.

Live video on the Web is starting to take off, judging by the massive jump in traffic that Justin.tv is witnessing. According to comScore, the live video site’s global audience saw a massive jump from 9.3 million unique visitors in January to 15 million in February, which is about the same number of people who went to Veoh and nearly twice as many as visited Hulu.com. Of course, Hulu is only available in the U.S., where it is fourth most popular video site, and its videos are watched on other sites as well. In the U.S., ComScore only shows Justin.tv attracting 1.4 million people in February. So most of its audience and growth is global, with particular strength in Spain, Brazil, Germany, and the UK.

Quantcast, which directly measures all three sites, shows a similar trend. Globally, Justin.tv has 22.1 million monthly uniques, compared to 15.8 million for Hulu, and 11.9 million for Veoh. While the U.S. numbers are 3.9 million for Justin.tv, 14 million for Hulu, and 4 million for Veoh. (Ustream.tv seems to be the second-largest live video streaming site with 6.7 million global monthly visitors and 1.4 million in the U.S.). These are all site numbers, Quantcast also measures “network” numbers which presumably includes videos embedded elsewhere, and those are about double the site stats for each service. Justin.tv itself claims 1,800 percent year-over-year growth in unique visitors based on its internal Google Analytics numbers.

What all of these number show is that live video is beginning to make its mark, and could soon challenge the top video sites for the attention of audiences. There are 428,000 channels broadcasting live video on Justin.tv. Of those, 40,000 channels broadcast 1.75 million hours of video each day. And the level of engagement seems to be just as high as on regular video sites. ComScore’s VideoMetrix estimates that the average Justin.tv viewer in ethe US. watches just over an hour a month (64.7 minutes), almost exactly the same as a Veoh viewer (64.5 minutes), but still well below a Hulu viewer (87.2 minutes).

So why is Justin.tv so popular overseas? Could it be all the live sports events streamed over the service? Soccer and female wrestling seem to be particulraly popular.

Things are not going well for Universal Music Group’s in its lawsuit against video-sharing site Veoh. First, the Los Angeles judge, A. Howard Matz, ruled last month that the safe harbor provisions of the Digital Millennium Copyright Act do apply to the case, contrary to UMG’s request for summary judgment.

On Monday, Veoh scored another point in the preliminary legal sparring that always precedes the main event. The same judge threw out the part of the complaint that named Veoh’s investors as defendants in the suit. UMG had tried to argue that Shelter Capital, Spark Capital, and Michael Eisner’s Tornante Company were guilty of “vicarious copyright infringement” and “inducement of copyright infringement” (yes, those are actual crimes) because they effectively control the company and sit on its board.

UMG cited as its precedent a case involving Napster and its then-single investor Bertelsmann, which actually was found guilty of vicarious copyright infringement, but only because Bertelsmann chose to keep Napster running even after it was obvious that it was an infringing service.

Judge Matz noted in his ruling that Veoh has so far not been found guilty of any copyright infringement, and his previous position on the DMCA’s protections shows that he understands the difference between users infringing copyright and Veoh. He also ruled that the mere act of being an investor or board member of a company facing copyright issues and fulfilling those normal duties does not constitute infringement, even if the company they “control” is found guilty.

Merely exercising ownership power to select members for a Board of Directors cannot invite derivative liability for infringement. Nor is there a common law duty for investors (even ones who collectively control the Board) “to remove copyrighted content,” in light of the DMCA. . . . these descriptions of how the Investor Defendants exercised control are the equivalent of “plain vanilla” characterizations of what directors ordinarily do . . . and are expected to do.

Rather, the board members and investors have to go out of their way to encourage copyright infringement. Yet if you read the ruling (embedded below), it is clear that Shelter and the other investors were doing everything they could to get rid of and filter out infringing content.

If this ruling and the last one are any indication, Universal Music Group has a tough road ahead as it presents its central case.

Jan 31 Umg Filing http://d.scribd.com/ScribdViewer.swf?document_id=11656017&access_key=key-igepf903sdjouu9pj01&page=1&version=1&viewMode=

Popular video site Veoh has just released a new version of its browser plugin, Veoh Video Compass. The plugin, which is available for Firefox 3 and IE7, presents a selection of videos relevant to your search queries and the pages you browse in an unobtrusive ribbon at the top of your browser. It’s a nifty feature that seems to work pretty well, effectively adding a video search to compliment whatever you’re looking at on the web.

At launch Video Compass works on Google, Yahoo, and most popular search engines, using your search query to suggest videos and related queries. The plugin is also gradually adding support for contextual matching, which tries to identify keywords on the page you’re browsing and offers related videos. Right now the feature works on selected portions of Amazon, Best Buy, WalMart, Wikipedia, and IMDB.com, and the company plans to continually add more.

Users can play each video directly from the ribbon, without having to load a new page. Clips come from a variety of sources, including YouTube and Veoh (with priority apparently given to the latter). Videos appear as popups with a dark overlay, which Veoh plans to use to embed ads.

Aside from occasional bizarre matches (which are to be expected as Veoh builds up its database), my biggest complaint is the fact that the Veoh Compass appears only after the page you’re visiting has finished loading (so your Google search will finish, and only then will the Veoh ribbon pop in, shifting everything down a few centimeters). This might sound like a trivial nitpick, but it gets annoying.

Alongside the new extension, Veoh is launching a new homepage that includes improved navigation and an increased emphasis on recommendations. The site is also now offering a selection of videos that are accessible on the iPhone (just go to the Veoh homepage from Mobile Safari).

For those Web companies that comply by it, the Digital Millennium Copyright Act is turning out to be their best friend. Last week, Universal Music Group (UMG) was denied a summary judgment by a Los Angeles court in its copyright infringement case against Veoh. (Court order embedded below). UMG wanted a summary judgment against Veoh, arguing that it could not hide behind the safe harbor provisions of the DMCA, which state that Web services are not liable for the copyright infringement of its users if it takes certain steps to prevent it.

This is the second time a summary judgment has been denied to a company trying to sue Veoh for copyright infringement. (The last time it was a porn company). These orders are setting important legal precedents not just for Veoh, but for YouTube and others also facing DMCA lawsuits.

The safe harbor of the DMCA states that Web services are not liable for copyright infringement if the content is stored “at the direction of a user.” UMG tried to argue that Veoh should not be covered by the safe harbor because it did a bunch of things with the music and video content after it was stored on its servers, including converting it into Flash, breaking it up into chunks for peer-to-peer distribution, and allowing other users to stream it or download it.

The judge, A Howartd Matz, didn’t buy the argument. He found Veoh’s position to be “more persuasive,” noting that user’s must agree to Veoh’s Terms of Service before uploading a video, and that the terms of service clearly prohibit uploading copyrighted material. In other words, the initial act of uploading is considered to be user-directed storage under the DMCA, and whatever Veoh does to process the video after that cannot be used to get around the letter of the law.

If you live by the DMCA, be prepared to die by the DMCA.

http://docs.justia.com/dcfdoc.swf?s=california&c=cacdce&cn=2:2007cv05744&cid=395693&dn=293&aid=0&page=1

The writing is already on the wall. YouTube is resorting to selling off video search results to the sexiest bidder and just today announced that it is extending overlay ads in YouTube Partner videos to embedded videos on other sites (previously these would only show up on YouTube itself). It is pulling out all the stops to try to get those revenues flowing. Meanwhile, smaller video startups such as Veoh and Revsion3 have already cut back on staff and shows in order to survive. So you can throw this slide out the window:

There is plenty of video inventory, just not a lot that advertisers want. Although YouTube streams more than 5 billion videos a month, estimates bandied about are that only 3 to 4 percent of those videos have ads. That is still a lot of videos, but it means that much smaller competitors such as Hulu that focus only on professionally-produced, advertiser-friendly videos are much closer in revenues to YouTube than the raw number of video streams would suggest.

But even the videos produced and distributed online by the TV networks are bringing in only a fraction of the advertising dollars that they do on regular TV. NBC CEO Jeff Zucker’s fear that the Web will turn “analog dollars” into “digital pennies is coming true. According to Dean Denhart, the CEO of BlackArrow (a company that provides an ad-management system for on-demand video across both cable and the Web), mainstream video fetches an average of about 50-cents per thousand viewer per hour watched on broadcast and cable TV, compared to 5 16 cents per thousand viewer per hour watched for the same video on the Web. [Correction: I got this slightly wrong. The BlackArrow comparison between the value of video on TV and the Web is not per ad impression, but rather per hour of video watched, and has been amended in the preceding sentence. The correct comparison is 50 cents per viewer for TV versus 16 cents per viewer for the Web].

In other words, TV and media companies can make ten times as much by putting a video on TV than they can by putting it on the Web, even if that video attracts the same size audience. Online video startups can look at that as an opportunity to close that gap, but they should also realize that the Web is not the only game in town. In fact, cable companies are striking back by gradually shifting up their video-on-demand channels to a bigger mix of free, advertising-supported video. Cable’s answer to Youtube will be more video-on-demand channels with better videos that advertisers will line up to buy ads for at ten times the price they are willing to pay for ads on YouTube, or Hulu for that matter.

Here’s a slide Denhart likes to show that puts things into perspective. In 2008, he estimates that people in the U.S. watched 389 billion hours of plain old TV. That compares to 95 billion hours of on-demand TV, which he breaks up into live DVR (59 billion hours), time-shifted DVR (23 billion), cable and satellite video-on-demand (6 billion hours), online video (7 billion hours), and digital downloads (800 million hours). So of all 484 billion hours people will spend watching video in the U.S. this year, only 1.4 percent will be online video.

By 2010, Denhart thinks the overall viewer-controlled portion of the video pie will increase from 20 percent of all time spent watching videos to 32 percent. And both online video and video-on-demand will both grow to 2.7 percent of time watched, or about 14 billion hours each. Which segment do you think will be making more money from advertising in two years?

Last month, I co-moderated a Beet.TV roundtable on online video where we discussed some of these issues. It was clear that the budding online video industry is still trying to figure out the best way to proceed to profitability. Below are two clips from that event.

In the first clip, Brightcove exec Adam Berrey suggests that focusing too much on video advertising inventory per se (pre-rolls, post-rolls, etc.) is the wrong way to think about it. Instead media companies should think more holistically about selling their audience instead of their inventory. And video is just one way to do that. Also brands that use online videos to tell stories about their products may end up creating closer connections to consumers than simply sticking a 15-second commercial on a million videos produced by somebody else.

In the second clip, MSNBC.com president Charlie Tillinghast paints a dour picture of the exit scenarios for Web video startups. Web video startups hoping to get bought by a bigger media company will likely be disappointed by the price they can get. And it is no longer enough to simply have built up an audience that a startup then can then sell to a bigger media company. The only startups that will be bought are those with “demonstrable” revenues or those that have attracted desirable audience niches that the bigger companies lack.

Owners of the SanDisk Cruzer line of flash drives might be interested to learn that its now possible to launch the Veoh Web Player directly from the U3 interface that pops up when the drive is inserted into a USB port. You can use the Veoh software to schedule and download various types of web video directly to your Cruzer drive to create and ever-changing, on-the-go content library.

The Veoh feature will be available on new Cruzer flash drives and can also be installed separately onto existing Cruzer drives by going to www.sandisk.com/veoh and downloading an update. Full press release after the jump.

SanDisk and Veoh Networks Launch Portable Video Web Player for SanDisk Cruzer® USB Flash Drives

The Veoh™ Web Player for SanDisk Enables Portable and Secure Video Consumption on Any PC

MILPITAS, Calif.–(BUSINESS WIRE)–SanDisk Corporation (NASDAQ:SNDK) and Veoh Networks Inc. (www.veoh.com) today announced the availability of the Veoh™ Web Player for SanDisk, a portable video player that is initially available only on SanDisk® Cruzer® USB flash drives. The Veoh Web Player for SanDisk, allows on-the-go viewers to browse, search, and enjoy millions of videos available through Veoh.com on any computer¹at any time – including TV shows, movies, web series and popular independently-produced content from all over the Web.

The Veoh Web Player combined with SanDisk Cruzer USB flash drives provides users with a broad selection of video content on Veoh.com and the power of a peer-to-peer client in a single portable and password-protected application. With the Veoh Web Player’s Library and Import features, users can easily manage their personal video collection, both online and offline. When permitted by the publisher, users can schedule downloads of videos to their library to watch later or at another location. U3™ Smart technology, which was developed by SanDisk, allows applications to run from a SanDisk Cruzer USB flash drive, without having to be installed on a computer.

The Veoh Web Player and SanDisk Cruzer USB flash drive offer enhanced security features as well. Password protection on SanDisk Cruzer USB flash drives prevent unauthorized access to personal video files in case the drive is lost or stolen. And since U3 Smart technology doesn’t require a separate video application to be installed, users can enjoy video content without leaving any traces on the host PC.

“The Veoh Web Player is a perfect companion for SanDisk’s Cruzer USB flash drives because our customers often want to watch videos when they’re away from home and it often isn’t possible to install software on the computer itself,” said Yaniv Lavi, Director of Product Marketing for the consumer retail business unit at SanDisk. “Our SanDisk Cruzer USB Drives are ideal for watching and downloading videos because they come in capacities of up to 16GB², are technologically capable of streaming high definition content and come equipped with security features that help protect user privacy.”

“SanDisk’s reputation for innovation in flash storage devices and portable applications makes them the ideal distribution partner to make Veoh’s extensive Internet video services more portable for our viewers,” said Joshua Metzger, Senior Vice President of Corporate Development for Veoh Networks. “SanDisk Cruzer USB flash drives are ideal for video and Veoh.com users. This partnership puts Veoh in their pocket – so videos are ready to enjoy whenever and wherever they plug in.”

Users who previously purchased SanDisk Cruzer^® USB flash drives can download the Veoh Web Player onto their drives for free by visitingwww.sandisk.com/veoh or by accessing the SanDisk Cruzer Program Wizard of the U3 Launch pad. More information on U3 is available atwww.sandisk.com/U3.

Online video site Veoh is laying off 20 people, or 18% of its staff of 110. The move comes a month after Paidcontent reported layoffs in Veoh’s Russian office in St. Petersburg, which CEO Steve Mitgang says was a strategic decision rather than a financial one, as Veoh wanted to move its development staff to San Diego (where it has hired a replacement team).

This round is more of a financial move, given the new economic reality. The company insists that it is still strong on a financial front, and expects to be profitable next year, although CEO Mitgang admits profitability could be pushed out a quarter. Despite the somber news, he is confident Veoh will emerge as one of the few surviving video sites in what will no doubt be a coming shakeout.

According to comScore, visitors to the Veoh.com in the U.S. have come down from 4.5 million people in June to 3.8 million in September. And total minutes spent on the site has similarly dropped from 99.6 million minutes in June to 66.8 million in September. That drop in visitors is more than made up for in the growth in its standalone video app, Veoh TV, which reached 2.3 million people in the U.S in September. Globally, 16 million people watched videos on the site in September, and another 12 million watched via the app (see chart below).

The company has raised $70 million, including $30 million just last June. We are adding this announcement to our Layoff Tracker.

This has been a brutal month or so for tech layoffs. According to our Layoff Tracker, there have been 19,683 job eliminations at tech companies announced since mid-September, and we’re not even counting the 24,600 people at Hewlett-Packard who are being eliminated as a result of its merger with EDS.

But only five big companies make up more than 90 percent of the layoffs: Xerox (3,000), Dell (8,900), Yahoo (1,500), eBay (1,500), and German chipmaker Qimonda (3,000). The other 33 companies are mostly startups, and collectively account for 1,683 layoffs. Although three more companies (Sony Ericsson, Nvidia, and TicketMaster) account for an additional 1,110 job losses.

After stripping those out, you get closer to a pure number of layoffs at tech startups: 573

That is the equivalent of about 57 startups with ten people each. And those are just the ones that we or other news outlets have been able to confirm. Our list of tips is much longer than that and we are working through it to confirm as many as we can. For instance, Cake Financial has laid off 30 percent of its staff, or 6 people.

Another company with unreported layoffs earlier this week was Meraki, which I’ve confirmed let go 20 percent of its staff (10 people). That makes Meraki the third Sequoia-backed company to announce layoffs this week. (The other two were Mahalo and imeem). Sequoia urged all of its portfolio companies to make cut-backs earlier this month.

At least most of these startups are already done with their layoffs, unlike Yahoo which announced a 10 percent cut is coming but won’t say who exactly is losing their jobs for another few weeks. Layoffs are bad enough, but don’t prolong the misery.

This past week alone, tech companies have laid off 13,809 people:

Company–––––––––Layoffs

Xerox————3,000
Daptiv————–21
Haute Secure———3
Cake Financial——–6
Mercent————-6
Dell————-8,900
imeem————-20
Mahalo————-6
TicketMaster——300
Eons—————8
Veoh————–15
Yahoo———-1,500
Wikia—————3
Meraki————-10
Break.com———-11

Total———-13,809

If you know of any layoffs at a tech company, please submit a tip with the name of the company and number of layoffs. If it’s been covered, also send a link to the blog post or news article.

Without much fanfare, Joost has finally turned on the browser version of its Web video service, as we noted it would last month. The new site is all based on Flash, and lets you watch old Bruce Lee flicks, Sci-Fi movies like The Fifth Element, and clips from Barely Political and Comedy Central.

The Flash site comes almost exactly a year after I wrote a post pointing out that Joost’s peer-to-peer software approach would not work and that it would have to switch over to Flash-based video, just like every other Web video service. People don’t want to have to launch a new piece of software to watch video on their computers. They want to watch it in their browsers (so they can quickly surf to another page when they realize how much the video they are watching sucks—or, if it doesn’t suck, quickly switch tabs when the boss walks by their desk).

It took Joost a year, but it has finally realized that the Web is where it’s at. Now all it has to do is compete with Hulu, YouTube, Veoh, DailyMotion, and the hundred other video sites out there.

Joost is all advertising-supported, and there are social elements like an activity stream showing you what all your friends are watching. Which is great, except that it assumes your friends are watching Joost. They aren’t.

(Hat tip to Gubatron).

Specifically, the court said that online video sites are protected under the safe harbor provisions of the DMCA if they do the following (my interpretation of the decision):

• Provide adequate notice to users that uploading copyrighted material is prohibited
• Swiftly comply with DMCA takedown notices “on the same day the notice is received (or within a few days thereafter).”
• Use fingerprinting and other technology to detect copyrighted material, even if the methods are flawed.
• Take measures to control infringing users. Specifically, infringing accounts need to be terminated and the email banned from any new accounts. The court held that IP address banning was not neccesary: “…Io has presented no evidence suggesting that tracking (or verifying) users’ actual identity or that blocking their IP addresses is a more effective reasonable means of implementation.”
• Transcoding files to Flash format does not put the files in the site’s control; they are still protected by the DMCA safe harbor (see previous post).
• Sites are encouraged to spot check videos, and if they do, to remove content that is likely infringing.
• Sites are NOT required to check every video. The court said “this court finds no reasonable juror could conclude that a comprehensive review of every file would be feasible. Even if such a review were feasible, there is no assurance that Veoh could have accurately identified the infringing content in question.”
• It’s important to have lots of non-infringing content. The court noted that Veoh had received DMCA notices on only about 7% of its content. This helped its argument that it was different than Napster, which “existed solely to provide the site and facilities for copyright infringement…the sole purpose of the Napster program was to provide a forum for easy copyright infringement.”

YouTube, which is obviously thrilled with the decision, emailed us the following statement to us from Chief Counsel Zahavah Levine:

It is great to see the Court confirm that the DMCA protects services like YouTube that follow the law and respect copyrights. YouTube has gone above and beyond the law to protect content owners while empowering people to communicate and share their experiences online. We work every day to give content owners choices about whether to take down, leave up, or even earn revenue from their videos, and we are developing state-of-the-art tools to let them do that even better.

The statement by the court that checking every video for infringement isn’t realistic is an important one for Google/YouTube, which has said 13 hours of video content is uploaded every minute on YouTube. If it’s impossible for Veoh to monitor all content, YouTube is going to have an order-of-magnitude larger problem.

Before the parties break out, it’s important to note that this is a district court decision and will very likely be appealed. I imagine YouTube may be lending one or ten of its lawyers to Veoh to assist in that appeal in any way possible.

But this is still a key ruling and one likely to impact the YouTube-Viacom $1 billion ongoing litigation as well as a slew of other cases.

The full order is included below.

http://viewer.docstoc.com/
Veoh v IO Group – Free Legal Forms

Finally, a judge who may have actually visited the Internet once or twice before deciding a case. Judge Howard Lloyd, a judge on the U.S. District Court in the Northern District of California, threw out adult entertainment company IO Group’s 2006 copyright infringement case against Veoh today. At the time Veoh had some user-uploaded porn on its service that belonged to IO Group. Despite quick takedowns from DMCA notices, IO Group sued anyway.

A key issue of the case turned on whether or not Veoh should lose DMCA safe harbor protection because they transcoded user uploaded videos to the Flash format, something every online Flash video site does as a matter of course.

IO Group argued that the transcoding made Veoh a direct infringer and that the materials were under their direct control. Lloyd disagreed, saying “Here, Veoh has simply established a system whereby software automatically processes user-submitted content and recasts it in a format that is readily accessible to its users. Veoh preselects the software parameters for the process from a range of default values set by the thirdparty software…ButVeoh does not itself actively participate or supervise the uploading of files. Nor does it preview or select the files before the upload is completed. Instead, video files are uploaded through an automated process which is initiated entirely at the volition of Veoh’s users.”

In other words, nice try but no dice.

Viacom-YouTube and a host of other Internet video related lawsuits continue to rage on, but the good guys won this one. But those of you thinking you’ll find a little adult content on Veoh now that they’ve won the case will be dissapointed. Veoh banned it permanently back in 2006. This case was about nothing but money.

The full order is included below.

http://viewer.docstoc.com/
Veoh v IO Group – Free Legal Forms

Veoh groups viewers into these interest groups based on their past viewing, searching, browsing, tagging, and commenting activities on the site. The ad-targeting technology uses some of the same underlying algorithms as its recommendation engine, and were both developed by chief scientist Ted Dunning. He previously built the recommendation engine at MusicMatch (later bought by Yahoo) and credit-card fraud detection algorithms at ID Analytics. The company claims that during the beta, ads that were behaviorally targeted performed twice as good as ads that were not.

Everyone’s trying to figure out how to make ads work on Web video—from YouTube to VideoEgg. A big issue is the quality of the video inventory out there. Many advertisers don’t want to risk associating their brands and products with user-generated video. That includes a large portion of the 100 million videos a month watched on Veoh.

Also, for behavioral targeting to really work, it needs to be done at Internet scale. Veoh not only needs to prove that it can provide better response rates to its video ads, but that it has a large enough inventory of advertiser-safe videos to matter. To do that, it would have to somehow monitor video-watching behavior beyond its own site (which it could do via partnership agreements) and become more of an overall video ad network. It would then have to make sure it doesn’t get tangled up in some of the privacy issues that behavioral targeting for display ads are running into.

Veoh raised $30 million in June (bringing its total capital raised to $70).

Update: Here’s a video interview from BeetTV with Veoh founder Dmitry Shapiro. It is from last month when Veoh announced its last round of funding, but about 1:45 in he starts talking about advertising and how they do targeting. Like everyone, Veoh is experimenting with a lot of different types of ad units (display banners, pre-rolls, post-rolls, overlays, sponsorship, etc.), but says “you just need to be smart about what you show to whom. I think that is really the key in advertising.”

Today, Intel Capital announced new investments in eight startups totaling $60 million. Below is each company, along with the size of the round they just raised. (Not all would disclose when I asked during the conference call). And while Intel led most of the investments it was not the sole investor, so the total adds up to more than $60 million.

Accertify (fraud management for online transactions): $4 million round.

Grid Net (energy management and smart grids for consumers): size not disclosed, but GE Capital and Catamount Ventures also invested.

HealthiNation (online health videos): did not disclose.

Internet Mall (Czech-based online retailer targeting Central Europe): $45 million (28 million Euros).

TOA Technologies (mobile workforce management): $13 million

Veoh Networks (Web video): $30 million

Vostu (Ning-like social network for Latin America): $1.3 million seed round.

Vriti Infocom (education marketplace in India): did not disclose. Intel was the only investor

Is there room for a video-sharing site besides YouTube? Intel Capital, Adobe Systems, and media investor Gordon Crawford are placing their bets on Veoh, which is announcing a $30 million series D financing. Intel Capital is leading the round, and previous investors Shelter Capital, Spark Capital, Goldman Sachs, Time Warner, Michael Eisner and Jonathan Dolgen also participated. This brings the total Veoh has raised to a whopping $70 million.

Veoh wants to move beyond the PC to mobile devices, and is putting a lot of resources behind developing its behavioral ad targeting platform for video.

The announcement also comes a day after Veoh started blocking access to all but 33 countries (plus U.S. territories) in an attempt to focus on the most lucrative markets (and, no doubt, reign in some costs—video streaming is expensive). The countries being blocked, including many in South America, Eastern Europe, and the Middle East, represent less than 10 percent of Veoh’s audience.

That audience, globally, is growing at a nice clip. The company claims 28 million monthly unique viewers, who on average spend 100 minutes a month on the site. And the avreage length of videos watched on Veoh is 10 minutes.

ComScore counts 18.5 million global unique visitors, as of April, and another 8.7 million who watch on the startup’s P2P software client, VeohTV. If you add the two together (the red and purple lines in the second chart below), it comes to 27.2 million, which is about the same as the total reported by the company. That combined total would put Veoh’s audience right below Metacafe’s (28.9 million) and DailyMotion’s (34.6 million).

And it is growing much faster than either one (538 percent over the past year, versus 70 percent growth for DailyMotion and 50 percent growth for Metacafe).

Of course, Veoh and all of these second-tier video sites still pale by comparison to YouTube, which boasted 300 million unique visitors worldwide in April.

Now that I have your attention, Compete has released a list of the fastest-growing (and fastest-declining) sites of 2007. Some of the fastest growers include Veoh, LinkedIn, Reddit, StumbleUpon, Six Apart, and WordPress. Some of the notable sinkers are Bolt, Xanga, Netscape, and Autobytel.

TechCrunch has the distinct honor of taking the No. 5 spot in the fastest-growing list, right behind YouPorn and in front of DateHookup. I am not exactly sure what to make of that. I guess Compete thinks we’re hot.