I recently talked to a former big-wig at MySpace. He said he was very impressed with the online video/mashup site, Photobucket.

Well, maybe Photobucket was getting too big. According to a piece in CNET, MySpace has blocked Photobucket users from posting on the site.

Why? Well, users were placing ads in the videos. And that's apparently a violation of the MySpace terms of service.

From what I understand, Photobucket gets a big chunk of traffic from the News Corp. (NYSE: NWS) site. So there's probably incentive to get a deal done, right?

Maybe not. Photobucket is trying to rile up its community against MySpace's actions. You can check it out on its blog.

I had a chance to interview Mark Sigal, the CEO and co-founder of vSocial, an online video site. According to him:

"There is no question that Photobucket hugely benefits from it's plug into MySpace, although I don't know the specific percentages. It speaks to the paradox of MySpace on the one hand benefiting from the rise of social media, which is fundamentally about openness and ease of viral distribution (so-called "embed and spread"), and on the other wanting to maintain control of it's ad inventory. Similarly raises the question of how services like Photobucket, which rely on being able to monetize viral traffic, build a business."

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

This week, Convergence Consulting put out a research report for online video.

Despite the hoopla of YouTube, the viewership for online video is still small compared to traditional television. For example, only about 15% of MTV's cable audience checks out videos of the shows. What's more, the advertising rates for traditional television and cable are still juicy.

I had a chance to interview Mark Sigal, the CEO and co-founder of vSocial, an online video site. According to him:

TV remains a great medium

There is a tendency to bucket these stories in absolutes, a-la TV going the way of the dodo bird, which is just not reality. TV remains a great medium designed for a viewing environment, which, if anything, consumers are more deeply invested in than ever, as evidenced by the growth of the home theater industry. We remain a generation of cocooners, and TV suits this mode very well.

Mark Sigal's company, vSocial, got off to a shaky start. It was launched in 2002, a time when people were fleeing the tech world. Sigal provides this assessment of vSocial's initial offering: it "failed spectacularly."

The company had a personal video subscription service, called MyPersonalVideos.com. It also required a software download. Pay money for a download service? No way.

On the second try, however, things are going much better. The service is web-based, allowing for easy upload, viewing and sharing of video clips.

But this is not the most important product for the company. Instead, it has leveraged its technology into a platform called vConnect Online Video Services. This allows other sites to create their own video channels, with the kind of YouTube features that online viewers expect. There is also the ability to monetize the content, such as through advertising network integration.

So how has Google's $1.65 billion purchase of YouTube helped vSocial?

According to Sigal:

1. "The deal instantaneously served as the 'Aha' moment where everyone got the fact that now, not tomorrow, was the time that you need an online video strategy."
2. "Qualified lead flow has literally doubled."
3. "The deal has set a market for what a very successful company in this space can be worth -- i.e., $1.65B. This frames the opportunity for investors and acquirers and also incites the greed factor for potential customers. Let's face it, no one wants to chase after small market opportunities."
4. "This put to bed the meme that online video was the next Napster."

Tom Taulli is the author of various books, including the Complete M&A Handbook and operates DealProfiles.com.