Update:   Here’s the word from Brightcove 

Brightcove, a formerly “promising” video distribution startup has given up it’s lackluster battle to compete with YouTube in consumer video, though *it will remain open as a distribution point for high quality video.    (High quality video?  Isn’t that an oxymoron in modern media parlance?).

ReadWriteWeb has an unsatisfactory summary of this event, failing to note that the key challenge for anything related to online video is this:   Video-related advertising doesn’t work.    More importantly it’s not clear it will *ever* work.   I’ve always been skeptical of how video would monetize, and still think YouTube may never justify it’s capitalization except as one more brick in Google’s massive wall of online dominance.

In fact it’s time to consider this interesting possibility – pay per click advertising may be a “one hit wonder”.     I’m not prepared to make this case yet but it’s not really clear that online advertising techniques outside of PPC are working well for advertisers, and even PPC is showing signs of reaching some cost limits in term of advertiser ROI.     Success for advertising agencies (Google is number one, with half the online ad take)  should not be confused with success of the advertising itself.    Clearly PPC is working for many, but part of what is happening is that offline advertising is finally recognized for what it is, which is an “emperor without any clothes”.      I’d argue that as a general rule (ie more than 50% of the time) offline advertising campaigns have negative ROI.    Watching in the Travel industry how negative ROI is spun by ad salesfolks as positive ROI and how failure is analyzed as “success” has been a real eye opener, and I think these mathematical misperceptions are pervasive in the industry. 

Another powerful force is the impact of “free” social network marketing.  Word of mouth has always trumped paid advertising, and social networking is ushering in a new era where consumers not only control what they buy, they are working to control the ads they are exposed to and are talking a lot about products independently and without advertising intervention.    Facebook’s recent “beacon” fiasco tried to spin this backwards and has had very questionable results.

Pay per click has brought much better ROI measurement to mom and pops as well as large companies whose agencies are having increasing difficulty spinning failed “branding” campaigns as a big success.  

Brightcove is not an exception: look for more failures in the video space and elsewhere as the 2.0 bubble slowly deflates into a balance with rational business practices.