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Time Warner Invests in ScanScout

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Time Warner Investments has joined the Series A round of video advertising startup ScanScout. The amount of the investment was not disclosed, though the round had originally netted $7 million in May from General Catalyst Parters, Ron Conway, and First Round Capital.

We spoke with ScanScout CEO Doug McFarland last week, who said the strategic investment from the media giant would help open up industry connections, paving the way for cooperation with other Time Warner (TWX) video properties such as Truveo. Time Warner has a variety of online video-related investments, including Veoh Networks and Ripe Digital Entertainment.

ScanScout is serving between 25 and 30 video advertising campaigns on some 13 to 15 sites, including, Operator11, and Next New Networks, according to McFarland. Remember the company’s strength is contextual targeting, done mostly on a performance basis so advertisers only pay when a viewer clicks on an ad.

The ad units are similar to those used by YouTube and VideoEgg, where a text ad telescopes into an overlaid video ad when a viewer clicks on it. An upcoming feature includes the ability to include ads in embedded video players, which seems like a natural step but could present problems with sites like MySpace, which don’t allow outsiders to make money off their pages.

Interestingly, McFarland admitted that due to the inappropriateness of placing its advertisers’ next to content like porn or bad news, the market for video ads is greatly reduced. “We are finding that for a lot of video — plus-50 percent of the video streams out there — there’s not an appropriate ad to serve,” he said.

ScanScout employs 22 people in offices in New York, Boston, Los Angeles, and San Francisco.