We’ve seen much activity in the world of video entertainment in the past few months—yet, consumers are still not getting what they want. They want to see their favorite show or movie or play their video games or listen to their music—wherever they are, at home or on the road and on whatever display they choose, TV, PC, cell phone, MP3s etc. The investment dollars that have been thrown in large quantities towards video startups have so far funded pieces of a puzzle—but no integrated solution.

For example, several players provide the infrastructure piece, either as CDNs (Akamai, Limelight etc) or based on P2P technology (Gnutella, BitTorrent etc). Then a different category of players provides the operating video publishing and distribution via the Web of various types of media content—from user-generated content (UGC) to major studio releases. The main players in that space are Brightcove, Move Networks, thePlatform (owned by Comcast), and Maven Networks. Then, we have what I call the “video aggregators” that come in two flavors: those who focus on UGC (long-tail) content (YouTube being the leader); and those who offer mostly head-tail content. Leaders in this category for ad-supported content are MSN Video, AOL Video, Yahoo TV, MySpace TV; for paid content, the leaders are iTunes, Amazon, and NetFlix.

Note that the line between these two aggregator categories is increasingly blurring, with UGC sites introducing studio content and with the growing phenomenon of “mid-tail content.” Such content is produced by semi-pros (individuals or small online video content startups), and it is generally composed of short-form episodes of shows. There is an increasing number of players in this space—including, for example, OnNetworks (which received $12 million in the second half of 2007 from Accel, AT&T, and Austin Ventures), National Banana, and PodShow)—and there are more to come.

The next piece of the puzzle is the Ad platform. With, again, many players—such as VideoEgg, Adap.tv, Broadramp, adbrite etc. The new entrants in that area have developed interesting technology, but they lack the capability to integrate various ad formats, insertion formulas, and targeting tactics across pages, short-form video clips, long-form shows, and open distribution. The same is true for another category—video search/discovery technologies—which leaped forward in the second quarter of 2007 in the way they can precisely identify a piece of video content. Such developments will hugely increase the relevancy of advertising to targeted users.

So, the battle to blend all types of content onto various screens with targeted advertising is just taking shape. AppleTV and Microsoft’s forthcoming “IPTV on Xbox” aim to do just that. 2008 may be the year of the “blended experience”, as other major media players—notably Google—are vying to capture and monetize the audience. Monetization will be the end goal of the battle, which will fundamentally reshape the way users consume media. The recent acquisitions of DoubleClick by Google and aQuantive by Microsoft are indicators of this larger trend.