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The founders of Viddyou, the small site that focused more on the creator than the video, are exploring options to get out of the video-sharing business. Co-founder Aaron Wadler explained via email that Viddyou was always an “underdog,” but believed it competed by rolling out advanced […]

ViddyouThe founders of Viddyou, the small site that focused more on the creator than the video, are exploring options to get out of the video-sharing business. Co-founder Aaron Wadler explained via email that Viddyou was always an “underdog,” but believed it competed by rolling out advanced features before the competition. But that situation has changed, he told us:

“Now that they’ve caught up, we’re left competing against a room full of giant corporations that are able to take a loss in order to vie for dominance (a luxury our small biz just can’t provide). Add to that a difficult fundraising environment and a decline in our premium accounts (our primary source of revenue) since the economy tanked, and we’re — unfortunately — forced to explore alternatives.”

One of the features Viddyou jumped on early was offering HD, and Wadler says Viddyou was the first to offer 1080p high definition. According to Viddyou, 4.5 percent of all videos uploaded were in HD (once HD was an option), and 67 percent of all the video views ever on the site were in HD. But that popularity came at a price; delivery and storage of HD video was seven times more expensive for the company.

Wadler says that the Viddyou community is growing faster now than it ever has before, with close to 50,000 members currently — but all that growth is in free accounts, which aren’t monetized. Premium accounts, the company’s revenue stream, have been falling, with a 50 percent drop in the number of new premium accounts each month from a peak in December 2008.

Viddyou was always tiny, though, and not really in the same league as YouTube, which isn’t just the 800-pound gorilla in the video-sharing space — it’s the whole dang zoo. The competition has all but ceded the entire sector to YouTube. Metacafe is moving towards pro content; Microsoft is paring down Soapbox; Grouper became Crackle and dropped video uploads; and AOL ditched UGC uploads.

Additionally, Viddyou faces competition from Facebook, a growing force in the online video world, which has the added advantage of having most of the people you want to share videos with already in one place.

Viddyou has been around for three years and raised $200,000 in outside funding. Wadler says that if the revenue stream continues to fall as it has been, the company will have a “challenging” 2010. If faced with the worst-case scenario and it can’t find a team to take over, Viddyou will “make every effort to make sure everyone has plenty of notice and an easy way to retrieve or migrate their content.”

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