Video Ad Provider Overlay.TV Raises $3.8 Million Second Round

imageVideo ad provider Overlay.TV has raised another C$4.6 million ($3.8 million) in a second round of funding. The backing comes from returning investors Celtic House Venture Partners, Tech Capital Partners and EdgeStone Capital Partners, who provided the Ottawa, Canada-based company with its C$4.6 million first round back in January.

Overlay.TV exited beta in September after six months. While the company has generally targeted blogs and other user-gen sites for its ad integration, the funding will be used to produce more professional content. Since leaving beta, it has signed deals with Nettwerk Music Group, a Canadian music label and Hollywood Records. But as a WSJ piece shows, the surging growth in online video ad revenues are starting to ebb.

Take Hulu as a good example of how things have begun to sour. The revenues for the NBC Universal/NewsCorp. JV continue to rise on a month to month basis. But Hulu’s ad spaces are no longer sold out, as they were back in August. Still, as online ad growth forecasts get revised down to single digits next year, video ads are still the best bet. eMarketer is projecting 45 percent gains (down from 49 percent growth projection this fall) for the category in 2009 for a total of $850 million, meaning that it will remain a relatively small portion of total $25.7 billion in expected online ad spending next year. Release