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Dailymotion: another video site, another huge financing

dailymotionJust a week ago, I wrote, half in jest that 8 figure deals were becoming increasingly common and frighteningly familiar Internet video startups.  I didn’t think I’d be reiterating the point again so soon.  But, turns out, another round of extreme funding has already come down the pipeline. I thought wrong.

Besting Veoh’s $25m and Metacafe’s recent $30m but shy of Joost’s $45m and Brightcove’s $59.5m, French-based video sharing site Dailymotion has raised a $34m second round.   The round was led by European firms Advent Venture Partners (London) and AGF Private Equity (Paris).  On top of $9.5m contributed last October, it brings the total funding raised for the site in one year to $43.5. 

The company, like most other players in the Internet video marketplace, is relatively young,  It was founded in 2005 but it has grown rapidly.  According to comScore data they have around 28m visitors a month.

Like each of its competitors, Dailymotion tries to do a few things differently. In their case, they are making an effort to prevent the kinds of copyright woes that have painted a bull’s-eye on Google’s YouTube by using Audible Magic’s digital fingerprinting/copyright detection software.  They are also trying to differentiate themselves by trying to offer country specific destinations – notably around Europe – where sites like YouTube have not yet gained as solid a footing (compared to their US position).

So many of these sites look similar.  Big as user-generated Internet video is, it’s hard to imagine success will be widespread even with such staggeringly large amounts of capital being thrown around.  Many of the sites rely on similar pools of content, and for many, it appears, there is also an overlap among their users. With limited differentiation between sites, it’s easy to see them as being interchangeable commodities; to believe viewer loyalty can easily be lost.

Some will argue that’s not the case. They will say it’s like the development of television, that there’s room for many channels, that each of these sites is like its own network station.  Others will argue this is an investment bubble with a bunch of deep-pocketed investors trying to ride the same wave as their peers.  

There’s a foundation for both arguments, especially in consideration that Internet video advertising (the revenue source forecast to justify much of these valuations) is still a nascent industry.  There is potential for innovation and success, or failure.  To me, it seems dangerously reminiscent of the Portal Wars that went on in the mid to late 90’s.  Remember: Excite? Lycos? Altavisa? ….   Is this another go-round of the same irrational exuberance? Maybe, maybe not.  I’m remaining agnostic; cautiously skeptical.  

The use proceeds for Dailymotion’s deal haven’t been disclosed.  They will, however, according to executive Mark Zaleski, allow them to reach profitability.  The company hopes to earn money through a combination of banner and video advertising. 

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