Overlay.tv Users Share Product Placement Bounty (If There Is Such a Thing)

Clickable video advertisement startup Overlay.tv beta-launches today, bringing a slight twist to an online video sector that’s getting nearly as crowded as how-to videos and girl-reading-news shows.

Ottawa-based Overlay.tv (“cheesy infomercial” embedded above) makes a tool that helps users call attention to products within a video and add cute graphics. It doesn’t alter the stream of a video, but shows the overlays within its own video player. Users can play with any embeddable content they find around the web and grab with a bookmarklet. Publishers have to opt out if they don’t want their content available to be modified by Overlay.tv users.

The clever part is that the company is focusing on user-generated advertising, motivating users to make videos into clickable ads by sharing affiliate relationships with over 700 online retail stores. The rev-share will eventually be something along the lines of 50-50, I’m told, though payments aren’t part of the beta. But honestly, how much money could you honestly make on a split of affiliate payments that come only when a viewer clicks on a hotspot in a video? Unless you’re Perez Hilton, not much.

Meanwhile, competitors PLYmedia has turned away from the consumer space and Mojiti went offline after its team joined Hulu. Others in the clickable product placement space include Asterpix and VideoClix. If you’re going by mashup and markup features, I would say MySpace-owned Flektor wins, though it doesn’t have the product placement angle.

It’s probably a good thing the Overlay.tv already has $4.6 million in funding from Celtic House Venture Partners, EdgeStone Capital Partners and Tech Capital Partners, so it can have time to figure out its business model.

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