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Veoh’s Service Start of Something Big in Internet Video Sharing

Not that long ago, a public access TV channel, like the one that propelled two metal & #173;head teens to stardom in the 1992 movie hit “Wayne’s World,” would have been the only conduit for such amateur entertainers.

But today, dozens of video-sharing Internet Web sites are striking new ground , and not from the basement.

San Diego-based Veoh Networks launched a new online video service this month, and said soft drink maker Dr. Pepper would be the service’s first advertiser.

In addition, Veoh is partnering with US Weekly magazine to offer a celebrity news channel.

While Google bought the No. 1 rated Internet video site, YouTube.com, last year for $1.6 billion in stock, Veoh has ex-Disney executive Michael Eisner sitting on its board and an investment from Time Warner.

Now that the Internet video space is getting crowded, it’s time for these companies to distinguish themselves, said Allen Weiner, research director with Stamford, Conn.-based research firm Gartner.

Video sharing sites, also called peer-to-peer sites, make money mainly through advertising, and often pay a portion of ad revenue to those who post videos, sometimes based on the popularity of their offering.

Veoh Chief Executive Officer Dmitry Shapiro, who also founded San Diego-based Akonix, which focuses on security for instant messaging in the workplace, said Veoh’s full-screen video is higher quality than that found at other sites.

Veoh’s strategy is to make it easy for consumers to use its downloadable program to watch Veoh’s content on TV or mobile devices such as MP3 players.

Veoh’s program for organizing videos was designed by Ted Dunning. Dunning created a similar program for Musicmatch, which was sold to Yahoo in 2004.

Of late, Veoh has been among the top 1,000 busiest sites on the Web , there are more than 100 million in all , according to Alexa.com, an Internet research Web site. Veoh’s traffic grew 30 percent last month, Shapiro said.

But the site is hardly without competitors.

MySpace is ranked second in terms of overall traffic, Weiner’s research shows.

Locally, there’s eefoof.com, Vmix.com, and DivX.com. Non-local players include a site out of France called Dailymotion.com, Break.com, Microsoft’s Soapbox and Yahoo Video , just for starters.

Shapiro likens video sharing through the Internet to what he calls “the democratization of print broadcasting,” or the evolution that expanded the choices by which readers gain and share information , from newspapers to blogs.

“We’re doing the same thing for TV,” he said. “Bunny ear antennae gave us a few channels, then cable TV expanded the spectrum to 200-plus channels, then satellite gave us thousands of channels, and now comes Internet TV, expanding the spectrum to hundreds of millions of channels. It allows anyone in the world to have a channel , all they need is a laptop and the Web.”

Peer-to-peer video sites are beginning to take ad revenue away from other broadcasting venues, like TV, said Weiner.

“When you’re talking about billions of dollars of ad revenue spent annually, even a 1 percent shift means a lot,” he said. “People are going to become more aware of this opportunity.”

As the market develops, the sites will begin to seek revenue beyond ads, by expanding services, Weiner said. For example, sites like Veoh could be a provider of video for local TV news, if TV news stations don’t already have their own capabilities to offer video online, Weiner said.

Creators could go beyond just posting their videos online and receiving a portion of ad revenue, he said.

“Maybe they’ll eventually have their own site through (sites like) Veoh, and obtain revenue from ads on their own Veoh-powered Web site,” Weiner said.

Kevin Carroll, director of the San Diego chapter of the electronics trade group, the AeA, said Veoh has captured great interest in the venture capital community. The firm has raised more than $14 million to date and is preparing for a series C financing.

But local competitors aren’t simply startups without credibility. Local competitor eefoof.com, for example, was founded in 2006 by Kevin Flynn. He was the co-creator of Peanut Butter Jelly Time, a flash animation program that emerged in the early 2000s, as well as Matt Farley, a Web developer who graduated from California State University Sacramento.

VMIX.com emphasizes its compassion for creative types. According to its site, executives from Apple Computer, Fox Studios, MP3.com and Universal Music Group created the site.

CEO Greg Kostello is the former president of Vivendi Universal-Net Technologies, and a former vice president at MP3.com.

The site talks of empowering amateur filmmakers:

“Take your fully-branded video player offsite , from MySpace to your own Website,” it says.

But while the creative and independent are celebrated, the company focuses on using its studio connections to brand itself as the video site that will have the ultimate payoff in Hollywood.

“And best of all, gain exposure in the VMIX Network , leading entertainment media, lifestyle and business partners, including Warner Bros., Fox Studios, Bravo, Family Guy, Fox Searchlight, Starz, L.A. Times, Chicago Tribune, Lions Gate, and hundreds more!”

San Diego’s DivX.com offers video through its DivX Stage 6, but it is also focused on selling and endorsing digital equipment including cameras, recorders and TVs.

DivX was founded in 1999 by a Harvard law graduate and a former vice president at MP3.com, Jordan Greenhall.

Shapiro has been working on Veoh since 2004, and the site had been in a beta test mode for the last several months until launching this month for users.

He maintains that the rest of the pack has “grainy videos,” and that Veoh’s focus on channels, or categories, will make it the best such site.

“That’s the key to what’s going to win this field,” Shapiro said.

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