• MarketWatch, Monday, October 16, 2006 11:30 AM

Dallas Mavericks owner and dot-com billionaire Mark Cuban, who sold Broadcast.com to Yahoo for some $5 billion during the height of the dot-com madness, says that a bubble is now being created in online video advertising. He says there are too many players out there that value themselves very highly, but there will never be enough ad dollars to feed everyone. Says Cuban: "Everyone is chasing broadband video ad money from agencies. It's the hot-dollar right now."

This year, venture capitalist firms have spent a total of $521 million funding 53 different online video companies, up from $294 million and 48 companies last year. And we still have a quarter to go this year. Competition for video ad dollars is such that some startups find they're now competing with their content partners.

FeedRoom, which provides video infrastructure for content companies, just lost its deal with NBC and is now focusing on licensing fees from corporations. "Companies trying to make it rich off of advertising risk being competitive with people providing them the content," says Daniel Webster, senior vice president at FeedRoom. "We've learned the dangers of that model."

Companies like DAVE.tv are trying to create a social network out of its video content, in order to provide media companies with groups of users who like specific types of content. Video Egg and Revver hope to help content producers make money, which they'll share, along with the content distributor. Cuban thinks content producers will never make money this way. "Producers, editors and posters who want to make money from their creations are going to be few and far between. Most will make less than minimum wage, much like we have seen with Podcasters."

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