Online Video: Mad Money & Battle For The 10th Spot

[qi:032] While Google’s (GOOG) YouTube continues to gain market share and increase its lead in the Web video market, funding to its competitors continues to flow
unabated. Yesterday, Dailymotion raised $34 million, following on the heels of Veoh ($26 million) and MetaCafe ($30 million.)

These three companies alone have raised a total of $125 million — a stupendous amount of money considering that they don’t even figure among the top ten video destination sites.

The future for these companies is unclear, but that level of investment indicates that they may have no option but to become standalone businesses. In the meantime, the number of likely buyers is slowly decreasing. For now, NBC and Fox, who are backing Hulu ( $100 million), don’t seem to care too much, and Yahoo (YHOO) has its hands full.
Microsoft (MSFT) isn’t going to be interested because all three of the video sites use rival Adobe’s (ADBE) Flash technology. A European media or telecom company could be a buyer, but I can’t think of any right now.

The lure of video advertising (something even YouTube is trying to figure out) is too strong for investors to resist. I think online video advertising is a bit of a chimera. The big challenge for all online video destinations is the ever-present threat of lawsuits for infringing content. Every lawsuit drains resources (and cash reserves), as Veoh is about to found out. Regardless, the battle for the tenth spot should be an interesting one. Time to pop the popcorn.