The coming Web video shakeout
The number of YouTube-like services now stands at a staggering 173 - and in April alone 3 outfits got $30 million in funding. Who will survive?
by Om Malik, Business 2.0 Magazine

(Business 2.0 Magazine) - Too many dotcom startups, not enough seats at the party. No, we're not talking about yesteryear's bubble - we're talking about today's online video market, stuffed full of entrants with names like Broadsnatch, Eyeka, and Gkko.

In April alone, three video companies got $30 million in funding. But with the number of services now at a staggering 173, including 85 that host and share videos, investors are starting to worry.

"It's not possible that this many video-sharing sites can exist and make money," says David Hornik of August Capital, a backer of video services company VideoEgg.

True believers point to the rise of Palo Alto-based YouTube, which now serves 40 million videos a day. In theory, it could embed ads into videos and sell them for at least $1 per 1,000 views, or $15 million a year.

Casualties ahead

But since a large slice of that content is ripped from TV or movies, advertisers are likely to be wary of copyright infringement.

And a content-sharing company the size of YouTube could easily be spending $5 million a year on bandwidth and hardware alone. "People underestimate the costs and overestimate the inventory," says one veteran Silicon Valley investor who has shied away from the space.

Video company CEOs like Mark Sigal of vSocial and Tom McInerney of Guba agree that a shakeout is coming. "There'll be a lot of casualties in the next year," McInerney predicts.

So Sigal and McInerney are scrambling for other revenue models - selling video-hosting services and content distribution to bigger brands - in hopes of finding themselves in chairs when the music stops. Top of page

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.