Video Site Veoh Cuts Staff, Boots CEO, Bets on Browser Plug-in

Video site Veoh, one of the biggest and best-funded players in the “who will be the next YouTube” competition, is restructuring the company, laying off a good chunk of its staff, and replacing CEO Steve Mitgang with founder Dmitry Shapiro.

Shapiro says the company, which has been primarily focused on playing video and selling ads on its own site, will now be concentrating on a new “Video Compass” player that users will have to download onto their Web browsers.

Shapiro says the company is laying off 25 people and will have a staff in “the mid-40s” when the restructuring is over. That’s less than half its size in June of last year, when the company raised another $30 million, bringing the total capital it has raised to $70 million. At the time, Veoh’s investors–which included Goldman Sachs (GS), Intel (INTC), Time Warner (TWX) and Spark Capital–valued the company at about $125 million, pre-money. VentureBeat first reported the layoffs and restructuring last night.

But Veoh’s video Web browser is one of several players in a field dominated by Google’s (GOOG) YouTube, and now Hulu seems to have established itself as a clear second place.

Comscore (SCOR) says Veoh’s audience peaked in March of last year, when four million viewers watched 33.7 million videos on the site. It says that by February of this year, Veoh’s audience had shrunk to two million viewers watching 16.5 million videos. Every Web publisher disputes third-party measurements, but in this case, Veoh says Comscore’s data are way off: It says it has 23 million unique users watching 200 million videos.

Shapiro insists that the company will continue to support its original video site, but argues that there are more opportunities with its new browser plug-in, which suggests videos to users who are searching for things on other sites. So if a Compass user was searching for, say, “CSI” on Google, it’s possible that the Compass plug-in would offer up a clip or episode of the CBS (CBS) show, via a player that would launch on top of the site.

“The website is extremely mature. It’s been around for 3 and a half years. It’s extremely successful,” Shapiro said. But “quite frankly, there are a lot of things like that. We love it and will continue to invest in it. It’s just that we also see that we have something that no one else has in Compass, and we’re saying we are going to be investing in and supporting that.”

Mitgang came to Veoh in July 2007 from Yahoo (YHOO), and shortly after that the company became enmeshed in a high-profile copyright lawsuit with Universal Music Group. The suit is still ongoing, and though Veoh has won several recent points, people familiar with the company tell me that the legal bills have been significant. I asked Shapiro if the cost of the suit had anything to do with the restructuring, but he declined to comment.

Here’s the press release:

VEoh NETWORKS TO Intensify FOCUS ON ITS SUCCESSFUL
VEOH VIDEO COMPASS™

Company to Streamline Efforts around Omnipresent Video Discovery

SAN DIEGO, CA (April 1, 2009) – Veoh Networks, one of the leading innovators in the online video arena, announced today that the company will be focusing its efforts around its highly successful Veoh Video Compass™ application.  Video Compass is a browser plug-in that makes video discovery a truly seamless experience, enabling video to be played while on every major search engine, portal and commerce site.  It enhances the browsing experience by surfacing recommended videos that are relevant to a consumer’s search terms.  These video recommendations – based on the viewing behavior of millions of online video users – make it easy for consumers to discover and watch videos from an index of millions of videos from around the Internet.  Veoh adds over 25,000 new Video Compass users daily and supports millions of recommendations each day on major web sites such as Google, Yahoo!, YouTube, Ask, MSN, Amazon, IMDB, Craigslist, eBay, Wikipedia, etc.

Meanwhile, Veoh.com, the company’s popular video portal, continues to generate more than 200 million video streams each month from a wide range of independent and traditional content publishers such as ABC, CBS, ESPN, Viacom, and Warner Bros.  The site reaches over 23 million unique users each month with average engagement time at more than 100 minutes per user, and helps dozens of blue chip advertisers reach a broad and highly targeted audience.

As part of Veoh’s continued focus on innovation, Dmitry Shapiro, Veoh’s Founder and Chief Innovation Officer, will be stepping in as CEO.  Shapiro replaces Steve Mitgang.

Shapiro stated, “Veoh was founded in early 2005 when video on the Internet was at its very beginnings.  Today after four years of being a pioneer in the online video space, we know a tremendous amount of what viewers, publishers, and advertisers want.  We have always believed that video discovery and personalization are ultimately the important problems to solve in the world of billions of videos, and have invested heavily in technologies to support that belief.  Video Compass is the latest innovation from Veoh that makes video discovery omnipresent.”  Video Compass can be downloaded at http://www.veoh.com/videocompass/.

As part of this new concerted effort, Veoh will be streamlining its organization to better enable the company to focus on providing compelling offerings to consumers, partners, and advertisers.

About Veoh Networks
Veoh Networks is an innovative Internet Television company that delivers broadcast-quality video programming via the Internet. Veoh has more than 100,000 content publishers – from CBS, Viacom’s MTV Networks, ABC, Warner Bros. Television Group, ESPN and Lions Gate to thousands of independent filmmakers and content producers.  For advertisers, Veoh offers compelling ways of engaging with a targeted audience and measuring performance of their ad buys.

Veoh Networks is a privately held company that is backed by leading technology and media investors, including Shelter Capital Partners, Spark Capital, Michael Eisner’s Tornante Company, Goldman Sachs, Time Warner Inc., Intel Capital, Adobe Systems Incorporated, Gordon Crawford, Tom Freston and Jonathan Dolgen. The company’s principal offices are in Los Angeles and San Diego, California.