The final exclamation point to a long, hot summer came Friday, as the French YouTube clone Dailymotion announced a $34 million second round of funding, capping a summer of mega-financing for YouTube-ish companies that totals more than $200 million.

In May, Luxembourg-based Joost announced it had raised $44 million for its downloadable software that shows channels of professionally-produced video. Then San Diego-based Veoh scored $26 million for a video sharing site and downloadable software that allows users to find and download video from around the Internet. And just last week, the Palo Alto, California-based Metacafe unveiled a $30 million funding round for its video sharing site that offers money to amateur video makers.

Meanwhile, NBC Universal and News Corp.’s yet-to-launch home for professionally-produced video on the web (since named Hulu), took home a $100 million round of private equity, for a reported total valuation of $1 billion.

Dailymotion, one of the fastest growing video sites on the Internet, raised its second round from AGF Private Equity and Advent Venture Partners, CIC Capital Privé, as well as existing funders Atlas Venture and Partech International.

The question these startups face is whether or not online video, expected to become a $3 billion advertising market by 2010, can justify this latest venture capital craze.

“I’ve seen this before, where people say that something is going to be big, therefore every site that’s doing well must become a success, and that’s not the case," said Forrester analyst James McQuivey. “Just look at Buy.com.”

The key, say analysts, will be for each of these now well-funded companies to distinguish themselves from one another—and more importantly from YouTube—so they can validate their investors’ bets.

The Paris-based Dailymotion, for example, has created separate video sharing sites for nine countries in Europe and North America, with language and content tailored to each specific region. That’s a strategy that YouTube has only just started tackling.

“All of these sites say they’re not just another YouTube, but I think one of the simplest to justify is the international play,” said Mr. McQuivey. “If you can tailor a content and ad sales strategy to serve Europe, that seems like a pretty obvious model that is different than YouTube.”

In addition to rolling out sites in more countries by the end of the year, Dailymotion plans to unveil in-video advertising and a content creator revenue sharing program, said a spokesperson Friday.

Now Emeryville, California-based startup Fliqz claims it has developed a web browser video uploading plug-in that it says raises the bar for all its rivals.

Fliqz says its plug-in lets users quickly upload videos to social networking pages, blogs, wikis, auction sites, classified pages, or other community areas on the Internet. It will allow people to avoid the two-step process of uploading a clip to a video sharing site such as YouTube and then embedding the code into the destination site.

The startup hopes that its browser plug-in will help to spur adoption of its own player on websites that don't already have video players. Fliqz, which has $3.5 million backing from Mohr Davidow Ventures, has been licensing its "white label" video uploading and playing software to blogging sites, travel pages, and other Internet publishers, which put their own brands on the player.

The two-year-old startup recently embedded its player into blogging publisher Movable Type’s new toolbar, and Fliqz is also working with Friendster, PBWiki, and others.

But the video uploading software area is rife with competition – including chief Fliqz foe VideoEgg, which has built an attractive ad network that has helped it aggressively and successfully convince dozens of social networking sites to use its software.

Fliqz hopes that getting more people to use its plug-in will help it gain traction among web publishers. The company does not have plans to generate direct revenue from the plug-in.

“We’re doing this to expose more people to the power of our platform, because this will have our Fliqz branding” said CEO Benjamin Wayne.

Gartner analyst Allen Weiner said the barrier to entry for "white label" video software on the Internet has become so low that the market is becoming chaotic, and nearing over-saturation. He expects that many of the companies in the space will not survive the year.

 “I think there will be a huge bubble in that business, and it will not be one of consolidation because there’s no need to consolidate,” said Mr. Weiner. “A year from now, there’s going to be half of the number of video software companies, with a few horizontal ones that go after the whole market, and some vertical ones that focus on a certain area, like travel sites.”

“Subjectively, Hulu strikes us as an inherently fun name, one that captures the spirit of the service we're building,” he wrote. “Our hope is that Hulu will embody our (admittedly ambitious) never-ending mission, which is to help you find and enjoy the world's premier content when, where and how you want it.”

A Hulu spokesperson said the name was born out of a collaborative process between a branding company and internal employees.

The naming of a new web site is not generally a newsworthy event, but then again most new domain names don’t enter the world with the backing of NBC and News Corp. as well as a $100 million private equity investment for a total valuation reportedly worth $1 billion. The companies have said they aim to dominate professional video content on the Internet and fend off the threat from illegal file sharing through peer-to-peer networks.

So can young Hulu possibly live up to expectations?

Fox Group CEO Peter Chernin and NBC president and CEO Jeff Zucker in March said they hoped other media companies would contribute content to the service and help make the new site the definitive home of professionally produced video streamed on the Internet. They also said the new video network would launch over the summer.

But it wasn’t even until July that the venture named Mr. Kilar as CEO. It has also added a smattering of additional content from such companies as CNET Networks, Comcast, Oxygen, and TV Guide, but has failed so far to sign on large partners such as CBS, Viacom, and Disney/ABC.

The question for Hulu is whether it can still convince more media companies to add content to a site that's owned and controlled by several giants in the industry. On the other hand, maybe it can still thrive without Lost or Survivor. After all, with NBC and Fox-affiliated hits such as Heroes, 24, and Bones, Hulu will launch as one of the more comprehensive advertising-supported (legal) venues for popular television shows on the web.

Starting in October, Hulu videos will be available through web portals including Yahoo, MSN, AOL, and MySpace, and by invitation only on Hulu.com for viewers who send in an email address.

At the time, Afterworld was set to start rolling out both on its home web site, and on YouTube in early May. The producers were hoping to cash in on YouTube's then-fledgling advertising program, relying on YouTube to sell ads and then send back some revenues. (BTW I'd provide a link but when Red Herring switched to a new web site we lost a bunch of our old stories online, so you'll just have to take my word for it that this story existed!) Observers thought this was a risky bet, but producer Stan Rogow said he had high hopes for the revenue-sharing potential of YouTube. He also had the mother of all backup plans in an international distribution deal with Sony that includes online, mobile, television, and film rights in places other than the U.S. The show has started airing in Australia on the Sci-Fi network.

So fast forward to Thursday, when the L.A. Times ran a story about Afterworld's debut on MySpace. My first thought was, "Huh? Didn't this already happen three months ago...on YouTube?"

 Turns out, things didn't quite go as planned. Mr. Rogow told me the project ended up taking longer to create, and costing more money than the producers were anticipating. The team now has around half of the 130 episodes in the can. The show never rolled out on YouTube, beyond the 10 preview episodes that had already aired.

"Crafting a genuinely compelling three minutes of something is very difficult," said Mr. Rogow. "Every episode has to have a beginning, a middle, and an end, and it's hard to do that in 3.5 pages, and then coming up with compelling visuals that complement the storytelling. That's why what was going to be May is now August."

So why the switch from YouTube to MySpace? Mr. Rogow was a little unclear on this one. He said he's still in talks with YouTube to air Afterworld (a 10-episode preview has already appeared on YouTube), as well as other video sharing sites. One nice benefit of the delay, said Mr. Rogow, is that three months on, video sharing sites and advertisers are more organized and prepared to support a very costly show like Afterworld - or at least, apparently, MySpace is.

"The nice news is that the world continues to move, and opportunities to find ways to monetize are increasing," said Mr. Rogow. "For a show as costly as ours, that's important."

Afterworld actually had its very first debut on bud.tv, a promotional site for Budweiser that has turned out to be a complete dud.

Afterworld's production house is already working on its next series - "The Gemini Division" - which stars Rosario Dawson. Mr. Rogow isn't sure how he distribute that one. Figuring out this online distribution stuff is turning out to be a pretty tricky task.

Announced Thursday, the round follows a $1.65 million angel round in December that also included Intel Capital.

The year-and-a-half-old startup offers publishers tools that use speech-to-text and semantic search principles that allow users to type a search term while they’re watching a video, and then jump around to spots in the video where a like-minded phrase is uttered.

 “Consumers can jump to part of the video they really like instead of having to look at things they don’t like,” Pluggd CEO Alex Castro said.

 Pluggd, which has been showing off its technology on pluggd.com, unveiled a corporate site Thursday designed to attract publishers and advertisers to become customers.

 Pluggd is hoping that inside-the-stream search will let it stand out in a crowded field of video search engines.

 Most widely used video search tools–Google’s, for example, or AOL’s Truveo–are still stuck with searching the metadata associated with the video as a whole without considering what’s inside the video. Others, such as Blinkx,  use text inside the video as tools to help the user better find an entire video that matches the terms they’re searching, and to help advertisers target specific places in a video where their message might be most appropriately displayed.

 But Pluggd is not alone in offering up tools for people to find the exact point in the video that includes what they’re looking for. Cambridge, Massachusetts-based EveryZing, for example, produces a transcript associated with pieces of audio and video that allows users to jump around to the point in the video where the exact same phrase is uttered.

Boston-based Gotuit offers a tool that allows people to jump around to specific places inside a video, but that’s based on a less technologically advanced system--inputting metadata from specific parts of the video. Gotuit’s customers include Sports Illustrated and, according to the company’s web site, Red Herring.

Scott Lenet of DFJ Frontier said that as the metrics advertisers look to move increasingly from page views to the amount of time users spend on the site, he’s confident that Pluggd’s system can help publishers keep users on their sites for longer periods of time.

"What we’ve found is that technology that lets people search in the stream translates into more time watching the video, because now you know that the content in the video is related to your interest,” said Mr. Lenet. “People abandon the video if they don’t get to the parts they want to see. If you think of minutes as inventory, content owners can create more inventory with this system.”

The company, which on Wednesday announced a $5.5 million round of funding from Charles River Ventures and Prism VentureWorks, hopes to stand out from the crowd by creating a browser-based virtual world where friends can gather to play games, much in the same way they might hang out in the real world and play a game of monopoly or pick-up basketball.

“What we’re basically building is a real-time social network, and it’s all about what you want to do with your friends right now. You can play games with them,” said Conduit Labs founder Nabil Hyatt.

The social gaming concept has become very popular in the past several months, as investors look to meld mainstream social networks such as MySpace with virtual worlds like Second Life and massively multiplayer online games such as World of Warcraft. These online worlds are seen to have the potential to generate tremendous revenues from immersive advertising and the sale of virtual goods.

Disney’s $350 million acquisition of Club Penguin, an online virtual world for children, earlier this month may have only increased pressure on investors to make their bets before it is too late.

Last week, Kongregate, a social networking site for casual gamers, received $5 million in a first round of funding. Kongregate allows users to upload games and chat and connect around their interest in games. At nearly the same time, the San Francisco-based Doppelganger was given $11 million for a virtual world where members connect in 3-D environments around music and pop culture.

It is not clear how Conduit, which expects its site to be ready for a public trial period by the end of the year, will manage to separate itself from the pack.

Will Kohler, a partner at Prism VentureWorks, said Conduit’s goal is to bridge the gap between the way people hang out online and how they interact with each other in the real world.

“It involves a good balance of cooperation and competition, of giving yourself a purpose so you’re not left wondering why you’re there and what you have in common with people,” he said. “We found that game play adds that, and can be used as a platform to build off of and take you in many directions.”

But Conduit Labs has been short on specifics. Charles River Ventures partner Susan Wu wrote in her blog that Conduit players users won’t be racing go-karts, saving princesses or slaying dragons. Mr. Hyatt said the site will tap into existing online social networks and profiles that users have already built for themselves elsewhere, so that users won’t have to recreate their online identities.

Conduit is not likely the last social gaming site to receive funding. Mr. Hyatt, in fact, would not be surprised to see the pace of investment quicken.

“There’s a ton of interest, but a lot of people are not pulling the trigger because they’re not sure what to pull the trigger on,” he said. “I think VCs have shown a decent amount of self-control, but we’ll see if that continues after the Club Penguin exit.”

]]>Alexandra BerzonInternetMediahttp://www.redherring.com/Home/22631#0Wed, 22 Aug 2007 16:32:32 GMThttp://www.redherring.com/Home/22631http://www.redherring.com/blogs/22625On Thursday SoundExchange - the organization that collects royalty fees for record labels - reiterated its May offer to allow the small webcasters to keep until 2010 the same royalty payment system of 10-12 percent of revenues that they've had before. The catch? They have to sign a statement by September 14 agreeing that if they end up earning more than $1.2 million then they will pay the same rates as the bigger guys. Earlier this year, the Copyright Royalty Board issued an across-the-board per-song fee that webcasters say is way too high, and negotiations with SoundExchange to create more webcaster-friendly payments are still ongoing

On Thursday I talked with some folks that represent small webcasters, who said each small webcaster will have to decide now whether what they're doing is a hobby or a business.

"This was a fine deal in 2002, when everyone was just getting started and trying to figure out how to make money, and the audience wasn't huge," said attorney David Oxenford, who represents six small webcasters. "But now you basically limit the ability of the small commercial webcaster to grow its business, and you can't bring in investors to invest in new programming or new facilities or publicity. Who's going to invest in a business that can't get bigger than $1.2 million in revenues a year?"

Mr. Oxenford and the Save Net Radio coalition that represents large and small webcasters said they wouldn't be surprised if Internet radio hobbyists - the folks streaming radio online pretty much just for fun - accept the latest offer, but they framed this as something that's really not going to affect the ongoing negotiations with SoundExchange.

"I don't see it as a big deal if hobbyists sign on, but it doesn't apply to the majority of webcasters," said Jake Ward, a spokesperson for Save Net Radio. "I hope we'll have news for everybody soon."

Point is, a new study from IBM, unveiled Wednesday, found that more people waste their lives away spend time consuming ungodly many, many hours of media on the Internet than they do the television.

The survey found that 19 percent of respondents globally said they spend six hours or more per day on personal Internet usage (so that doesn't count work Internet hours), versus 9 percent who spend that much time watching television. Sixty-six percent said they spend between one and four hours a day viewing television, versus 60 percent who spend one to four hours of their personal time online.

"Television usage is continuing to grow, but what we're finding is that in certain segments, people are spending more time on the Internet relative to watching television," said IBM's head of media & entertainment strategy and change Saul Berman, who conducted the survey as part of a study on changes in advertising that he's going to unveil in October. "I'd go as far as to say that the younger generation when they graduate from college, they're not going to think they need a cable subscription or a satellite or an IPTV subscription from a telco, because they're going to get all of these things on the Internet and put it on different screens and different devices, and there are some pretty radical shifts that can take place because of that."

IBM's survey of 2,423 adults in the United States, the United Kingdom, Germany, Australia and Japan skews disporportionally towards women and young people. Also, it was conducted online and took up twenty minutes of some people's lives, which means that all of the respondents are already Internet users, and therefore presumably more likely to use the Internet heavily for their media habits... no?  i.e. if you conducted a survey via the television, wouldn't you be more likely to find heavy TV watchers?

The study also doesn't specifically address whether the Internet is gaining on television as a percentage of total time users spend consuming media. A study that came out earlier this month from the private equity firm Veronis Suhler Stevenson (link here) said that television and radio combined for 70 percent of total media consumption among Americans, versus the Internet's five percent, according to a Reuters article.

]]>Alexandra BerzonInternet and Mediahttp://www.redherring.com/blogs/22618#0Tue, 21 Aug 2007 16:39:21 GMThttp://www.redherring.com/blogs/22618http://www.redherring.com/Home/22614

In a busy summer of online video investment, some startups are beginning to break away from the pack of YouTube wannabes.

The latest to emerge in high spirits is Metacafe, which leads all independent online video sites in viewership and on Tuesday announced that it had snagged $30 million in a third round of funding, for a total of $50 million raised.

That news follows Joost’s $44 million funding round last May, and Veoh’s recent $25 million funding announcement.

Not to say that any of those sites are set to dethrone YouTube anytime soon as the world’s most popular online video destination. But investors appear confident that even with a fraction of the audience, these spots can offer attractive alternatives to advertisers that might be too weary to get involved in YouTube’s more chaotic scene.

Metacafe trailed biggies YouTube, MySpace, Google Video, AOL Video, Yahoo Video, and MSN Video with 4.6 million unique U.S. visitors in July, according to Nielsen/NetRatings. Startups Break.com, Veoh, and Will Ferrell’s Funny or Die rounded out the Top 10.

“I think what you’re starting to see happen is that four to five independent sites are breaking out, while the 100 or so video sites funded in the last year are not making the audience threshold, and that means increasing returns for the winners,” said Richard de Silva, a partner at Highland Capital Partners. His firm joined DAG Ventures and existing funders Accel Partners and Benchmark Capital in the round. “That’s why we went for the No. 1 independent site. That’s a strong position to start from.”

Mr. de Silva was also attracted to Metacafe, he said, because its system is unique among video sharing destinations in using a group of volunteers to vet every video before it appears on the site and to toss away the garbage. Metacafe also offers compensation to budding online video talent based on video popularity, an effort to attract low-cost work that might still be higher quality and more advertising-friendly than your typical video sharing fare.

“The scale of YouTube is different, but Metacafe is a better media model,” said Mr. de Silva. “It’s a place where advertisers can safely buy their advertising, and where consumers can consume media in a more conventional way, by going to the home page to discover what the community finds interesting. YouTube has a billion pages of people sharing clips with one another.”

Metacafe representative Michelle Cox said the company plans to spend the cash infusion on building out its sales team to increase advertising revenue, setting up more branded channels, and peppering the site with some established filmmaking talent. In March, Metacafe started showing the video series “Café Confessions” from well-known television producer Steven Bochco. Last month it launched a promotional deal with Universal Pictures that allowed its users to mash up and re-edit content from the Bourne Ultimatum movie.

]]>Alexandra BerzonInternetMediahttp://www.redherring.com/Home/22614#0Tue, 21 Aug 2007 15:50:05 GMThttp://www.redherring.com/Home/22614http://www.redherring.com/blogs/22583Yikes. Two once-glimmering Web 2.0-y symbols- PodTech and Technorati - had more than a little sheen scraped off today after their CEOs walked out, not unexpectedly (but the fact that it happened on the same day gave us this two-for-one special, and the chance for bloggers everywhere to pownce).

Let's start with Technorati. Founded in 2002, the blog search engine was an early tech blogger crowd favorite, but it has suffered under intense competition from Google. It has tried to reinvent itself as a rich media search site for photos and video, but there's already tons of companies that are in the business of video and/or photo search and discovery, and Technorati doesn't have the most sophisticated technology for that, nor the brand name in that department. 

Technorati's founder and CEO, David Sifry, announced months ago that he was looking for his replacement. Apparently he never found it and wants to get the hell out anyway. "I decided that rather than waiting for the process to play out, I would go ahead and transition to the board exclusively, taking on the role of Chairman of the Board," Mr. Sifry blogged today. Some of Technorati's top brass will take over as joint committee presidents focused on day-to-day operations.

But perhaps more troubling was the note at the bottom of Mr. Sifry's post - eight staff members have been let go so that the company could "adjust our expense structure to be more appropriately aligned with our priorities moving forward." Technorati has had a few funding infusions over the past year to what was originally a $7.6 million third round of funding, for a total of $11.52 million. Mr. Sifry wrote that the company is in a "revenue" stage and building out its sales team. Sounds like what he's saying is the honeymoon is over.

Which brings me to PodTech, which in 2005 hitched a ride on the a little-trendlet-that couldn't...podcasting. Not looking so smart with the eclipsing from online streamed video and, say, YouTube. Like Mr. Sifry, founder and CEO John Furrier has said he was planning to leave amid a bunch of company changes and re-focusing on aggregation over content creation. Today that came true, as COO James McCormick took over. 

BTW, PodTech star Robert Scoble, who has become a kind of company spokesperson, just twittered: "I just realized I haven't had this much fun at PodTech in months. Tomorrow I am going to Stanford for more interviews with CompSci dept." And..."Change is, indeed, afoot, and it's a good thing."

Possible (and obvious) lesson: Web 2.0 hotties can flame out just as dramatically as their forefathers. But who knows, maybe it's all really fun!

On Thursday, the AOL-owned video search engine announced that it’s stepping out with a separately branded web site. It’s a move that pits Truveo against a slew of rivals, including video search sites Blinkx.com, Google Video, Pixsy, and EveryZing, and Veoh’s just-launched downloadable video browser.

And it prompts the question of why one of the best-known brands on the Internet would bother to spawn a new brand, rather than just use and sell the technology Truveo provides.

“I could see Truveo within AOL, Truveo within Google, or Truveo within TVGuide.com. But Truveo on its own? To get that kind of consumer traction is really an uphill battle,” said Gartner analyst Allen Weiner.

Founded in 2004 as a search engine to power other web sites, Truveo was purchased by AOL in 2006. Since then it’s become, among the Internet-savvy, one of AOL’s most admired businesses. It powers video search for AOL and hundreds of other web sites, including MSN's video sites. Like Google, Truveo searches metadata text associated with video hosted around the Internet. It lacks a high-powered speech-to-text tool that a few others, including EveryZing, employ to create and search video transcripts. Nonetheless, it’s been known to pull up some of the Net’s most relevant and best-organized video search results.

Using that same technology, Truveo.com will offer webwide video search. It will also let users browse videos under various categories and track the most popular videos on the web, as well as save and share search results and receive recommendations based on other users' tastes.

Truveo founder and CEO Tim Tuttle, who’s now a senior vice president for AOL Video, said Truveo has become so well known as a video search engine as to merit its own separately branded consumer site. Until Thursday, the Truveo.com web site had essentially been a stand-in to display Truveo’s technology to potential partners, rather than a consumer-facing site.

“What we’ve found over the past year is that in the industry, the Truveo brand has started to become very well respected for video search,” said Mr. Tuttle. “It’s associated with more than AOL, and we made the decision to focus on building the brand and building credibility from the traffic momentum we have.”

Mr. Tuttle expects the site to pull in users who are simply looking to find and organize video streamed online, as opposed to all the other features offered by AOL’s more programmed video site, AOL Video, which features video sales and uploading. That traffic, he said, should translate into potential advertising revenue. But he's still working out advertising plans.

“As Google has illustrated, the most opportune time to present advertising to users is at the point that they’re searching for something, but if you try to use the same models that drive web search for video search they don’t work,” said Mr. Tuttle. “We’re working out potential ways to provide contextually relevant ads at the time of searching, so we can monetize the traffic without being too intrusive.”

Mr. Weiner wondered if there might be some other motivation behind the launch of Truveo.com.

“This doesn’t look like something that’s been built to drive a lot of revenue with ad dollars,” said Mr. Weiner. “Another business motivation may be to showcase Truveo either to get more web sites to use the technology or to spin it off and sell it.”

]]>Alexandra BerzonInternetMediahttp://www.redherring.com/Home/22573#0Wed, 15 Aug 2007 18:49:58 GMThttp://www.redherring.com/Home/22573http://www.redherring.com/blogs/22549With news organizations slashing budgets and laying off journalists right and left, what great news for reporters then that the world is - virtually - expanding, with a whole new territory of fake-land to report about.Yes, it's true...although no one seems to want to invest much money in reporting about the real world, a production house now has Murdoch-Hearst-sized ambitions for virtual territories.

From LivePlanet, the Matt Damon-Ben Affleck endorsed folks that brought you Project Greenlight and numerous television and movie projects, comes Virtual World Productions. Not the most obvious choice for a new journalistic venture, but apparently LivePlanet spent some time trying to figure out how to get involved in the burgeoning area of online virtual worlds, and settled on the idea of establishing a new media organization.

Starting with Second Life (Grid World News) and World of Warcraft (Azeroth World News), VWP is going to operate web sites that report the going-ons in virtual worlds, taking the built-out metaphor of pixilated interactions more or less at face value.

"If someone spends two to three weeks building the coolest nightclub ever in Second Life, and they have a huge opening, we can cover the opening just like any nightclub in a big city would be covered," said LivePlanet CEO Larry Tanz.

Mr. Tanz said the company has hired a few full time editors and journalists, and something around 30-35 "stringers" to follow the happenings of Second Life and WOW, just as any local paper would cover its town. They'll also rely on user-generated reports from virtual world-ians who want to brag about whatever feat they've just accomplished.

So far, dedicated reporting on virtual worlds has been owned by "embedded" Reuters and CNET reporters in Second Life, as well as numerous blogs, and business-focused sites that cover the companies that operate the worlds more than the activities and people inside them, such as Virtual World News.

Mr. Tanz thinks there's room for more organizations.

"World of Warcraft has seven to nine million users, and that's the size of a top 20 media market," said Mr. Tanz. "A media market like that can support two to three local magazines and newspapers, and the revenue streams associated with that. We see an opportunity to build a real business here."

That business will come from advertising, along with a Craig's List-like classifieds bulletin board, where users can advertise services for virtual world residents.

Oh, and one nice bonus for journalists re. covering virtual worlds? No need to move to a podunk town.

]]>Alexandra BerzonInternet and Mediahttp://www.redherring.com/blogs/22549#0Tue, 14 Aug 2007 12:44:46 GMThttp://www.redherring.com/blogs/22549http://www.redherring.com/Home/22546Perhaps Silicon Valley doesn’t scare so easily.

Doppelganger announced Tuesday that it had received an $11 million infusion of venture capital, a ringing endorsement of virtual realms that follows pessimistic reports of a coming advertising backlash against the more famous virtual world of Second Life.

San Francisco-based Doppelganger operates a music-focused virtual realm where users listen to music, hang out with bands, throw parties, and make their avatars dance. Originally a single social venue called “The Music Lounge,” the Doppelganger world is expanding into a cityscape full of clubs, lofts, and streets, known as “vSide,” the company said Tuesday.

Comventures joined existing funders Draper Fisher Jurvetson, Greycroft Partners, Draper Richards, Trident Capital, and KPG Ventures in the third round of funding, which adds to the $14 million Doppelganger has already raised.

The funding is a timely boost for virtual worlds, given that the yearlong blitz of positive attention lavished on early media darling Second Life has recently turned a bit sour. Recent reports have brands pulling their wares out of the free-for-all world of Second Life, where users can do pretty much whatever they want. Part of the problem has been mayhem from an “army” of avatars that have responded angrily to commercialization in the world they’ve helped build. American Apparel, for example, closed up shop in Second Life after virtual “shootings” targeted avatars shopping in its virtual store.

Despite such chaos, Comventures partner Michael Rolnick said he remains convinced that brands will be drawn to virtual worlds—particularly the more staid environs of Doppelganger.

“We’ve taken a long time looking at this space, and we’ve come to the conclusion that this is going to be part of the marketing mix,” said Mr. Rolnick. “Marketers are going to spend money on television, radio, social networks; and now the next natural place to go is virtual worlds. This is how young people are spending their time.”

Doppelganger exists in a growing subgroup of virtual worlds focused on bringing a massively multiplayer online game (MMOG) experience into a contemporary pop culture world saturated with media stars. Atlanta-based Kaneva, for example, is trying to entice media companies to build out areas where fans can pretend to walk around and interact in their favorite television show.

Doppelganger has built out a virtual talk show studio for Tyra Banks, as well as rehearsal studios for such musical acts as the Pussycat Dolls and Gnarls Barkley. The site incorporates ongoing gaming elements involving musical acts, such as scavenger hunts and murder mysteries. It has also helped MTV build a separate virtual universe that replicates New York’s Lower East Side.

Doppelganger CEO Tim Stevens said Doppelganger’s controlled, contemporary universe—with the metaphor of hanging out in a hot club or Times Square—allows the company to very naturally incorporate brands as virtual drinks, clothes, or billboards.

“It’s like television, with programming and inventory slots for commercials,” said Mr. Stevens. “We do the same thing but execute it online, and it’s much more engaging.”

One example of such brand immersion is Doppelganger’s just-announced deal with StarStyle.com, purveyors of celebrity fashion. StarStyle will offer a boutique of virtual clothes in Doppelganger, through which fans can order real clothes.

Though the concept is hardly new,  the scale is unusual. New social networking sites are increasingly turning to contests both to build a user-base and attract higher quality user-generated content. But most prizes generally consist of small items and smaller cash deals. iYomu's promised $1 million payday is more network TV than startup-size.

The Auckland-based iYomu, which stands for I, you, me, and us, has raised an undisclosed round of private equity funding that has allowed it to put up the cash, said director Frances Valintine.

The prize money is designed to help the "social networking for grownups" stand out from an increasingly crowded field that includes Gather.com, BOOMj, Teebeedee, and Udugu.

Ms. Valintine said the challenge in targeting an older audience is that they’re not as likely to participate in the viral “invite a friend” features that helped sites such as MySpace, which quickly attracted a huge base of young users. She’s hoping the contest will solve that.

“If you look at the way a social network for the youth market spawns, they use tools for virally sending out music and other youth-related content, and a site for grownups is not going to propagate the same way,” said Ms. Valintine. “Grownups aren’t going to tell their friends what music they’re listening to at that moment, but they’ll go in and use the things they need to do and get back out. They’re not necessarily just cruising around.”

Taking a page out of the successful reality TV handbook, iYomu came up with the idea to offer $1 million to one lucky member who, over the course of 20 weeks, competes with other users in a series of puzzles. At the end, other users will vote on the winner among top competitors.

Ms. Valintine said that if the plan is successful, the company will keep running contests to entice new members to use the media storage, forums, and other features offered on the site.

But analyst Greg Sterling of Sterling Market Intelligence questioned whether, splashy contest or no, general-interest social networking for grown-ups is going to stick.

“There has to be something that is accomplished from using the site, because grownups have less time to spend networking online,” said Mr. Sterling. “The contest idea is fine, but the bigger question is once somebody shows up after contest has teased them, what are they going to get?”