Shapiro says the company, which has been primarily focused on playing video and selling ads on its own site, will now be concentrating on a new “Video Compass” player that users will have to download onto their Web browsers.

Shapiro says the company is laying off 25 people and will have a staff in “the mid-40s” when the restructuring is over. That’s less than half its size in June of last year, when the company raised another $30 million, bringing the total capital it has raised to $70 million. At the time, Veoh’s investors–which included Goldman Sachs (GS), Intel (INTC), Time Warner (TWX) and Spark Capital–valued the company at about $125 million, pre-money. VentureBeat first reported the layoffs and restructuring last night.

But Veoh’s video Web browser is one of several players in a field dominated by Google’s (GOOG) YouTube, and now Hulu seems to have established itself as a clear second place.

Comscore (SCOR) says Veoh’s audience peaked in March of last year, when four million viewers watched 33.7 million videos on the site. It says that by February of this year, Veoh’s audience had shrunk to two million viewers watching 16.5 million videos. Every Web publisher disputes third-party measurements, but in this case, Veoh says Comscore’s data are way off: It says it has 23 million unique users watching 200 million videos.

Shapiro insists that the company will continue to support its original video site, but argues that there are more opportunities with its new browser plug-in, which suggests videos to users who are searching for things on other sites. So if a Compass user was searching for, say, “CSI” on Google, it’s possible that the Compass plug-in would offer up a clip or episode of the CBS (CBS) show, via a player that would launch on top of the site.

“The website is extremely mature. It’s been around for 3 and a half years. It’s extremely successful,” Shapiro said. But “quite frankly, there are a lot of things like that. We love it and will continue to invest in it. It’s just that we also see that we have something that no one else has in Compass, and we’re saying we are going to be investing in and supporting that.”

Mitgang came to Veoh in July 2007 from Yahoo (YHOO), and shortly after that the company became enmeshed in a high-profile copyright lawsuit with Universal Music Group. The suit is still ongoing, and though Veoh has won several recent points, people familiar with the company tell me that the legal bills have been significant. I asked Shapiro if the cost of the suit had anything to do with the restructuring, but he declined to comment.

Here’s the press release:

VEoh NETWORKS TO Intensify FOCUS ON ITS SUCCESSFUL
VEOH VIDEO COMPASS™

Company to Streamline Efforts around Omnipresent Video Discovery

SAN DIEGO, CA (April 1, 2009) – Veoh Networks, one of the leading innovators in the online video arena, announced today that the company will be focusing its efforts around its highly successful Veoh Video Compass™ application.  Video Compass is a browser plug-in that makes video discovery a truly seamless experience, enabling video to be played while on every major search engine, portal and commerce site.  It enhances the browsing experience by surfacing recommended videos that are relevant to a consumer’s search terms.  These video recommendations – based on the viewing behavior of millions of online video users – make it easy for consumers to discover and watch videos from an index of millions of videos from around the Internet.  Veoh adds over 25,000 new Video Compass users daily and supports millions of recommendations each day on major web sites such as Google, Yahoo!, YouTube, Ask, MSN, Amazon, IMDB, Craigslist, eBay, Wikipedia, etc.

Meanwhile, Veoh.com, the company’s popular video portal, continues to generate more than 200 million video streams each month from a wide range of independent and traditional content publishers such as ABC, CBS, ESPN, Viacom, and Warner Bros.  The site reaches over 23 million unique users each month with average engagement time at more than 100 minutes per user, and helps dozens of blue chip advertisers reach a broad and highly targeted audience.

As part of Veoh’s continued focus on innovation, Dmitry Shapiro, Veoh’s Founder and Chief Innovation Officer, will be stepping in as CEO.  Shapiro replaces Steve Mitgang.

Shapiro stated, “Veoh was founded in early 2005 when video on the Internet was at its very beginnings.  Today after four years of being a pioneer in the online video space, we know a tremendous amount of what viewers, publishers, and advertisers want.  We have always believed that video discovery and personalization are ultimately the important problems to solve in the world of billions of videos, and have invested heavily in technologies to support that belief.  Video Compass is the latest innovation from Veoh that makes video discovery omnipresent.”  Video Compass can be downloaded at http://www.veoh.com/videocompass/.

As part of this new concerted effort, Veoh will be streamlining its organization to better enable the company to focus on providing compelling offerings to consumers, partners, and advertisers.

About Veoh Networks
Veoh Networks is an innovative Internet Television company that delivers broadcast-quality video programming via the Internet. Veoh has more than 100,000 content publishers – from CBS, Viacom’s MTV Networks, ABC, Warner Bros. Television Group, ESPN and Lions Gate to thousands of independent filmmakers and content producers.  For advertisers, Veoh offers compelling ways of engaging with a targeted audience and measuring performance of their ad buys.

Veoh Networks is a privately held company that is backed by leading technology and media investors, including Shelter Capital Partners, Spark Capital, Michael Eisner’s Tornante Company, Goldman Sachs, Time Warner Inc., Intel Capital, Adobe Systems Incorporated, Gordon Crawford, Tom Freston and Jonathan Dolgen. The company’s principal offices are in Los Angeles and San Diego, California.

Those would be the Web publishers, large and small, that hand over some of their ad space to Google (GOOG), which generally fills it with its ubiquitous text ads. Kim Scott, who runs AdSense sales, would like those publishers to know that Google knows times are tough, and that it wants to help, and that it’s improving AdSense all the time, and that they should hang in there.

Nothing wrong with the note–it’s always good form to send customers a little pick-me-up. But since most publishers we know use AdSense as an ad solution of last resort–because they have extra space to sell, or because they have no way to sell space, period–it’s hard to imagine a missive like this will be very persuasive.

Here’s the note , courtesy of VentureBeat’s MG Siegler:

Dear Publisher,

We understand that the recent economic turmoil has created a lot of uncertainty in the lives of AdSense publishers. During these difficult times, we’re continuing to invest in innovations that improve publisher monetization and advertiser value in the content network.

We’re focusing on further developing our product offerings and boosting ad performance for publishers. We recently announced advancements in AdSense for search and experiments to make ads more effective. We’re bringing DoubleClick technologies to AdSense publishers, and we’ll continue to launch new products and features. We’re also continuing to improve our offerings for AdWords advertisers, making it easier for them to target the Google content network. Features for advertisers, such as the new display ad builder, are designed to improve ad performance on AdSense publisher sites.

We’ll keep driving technological progress, but our best asset will always be our publisher partners. The strength of AdSense lies in the value of the content you bring to users and the quality of the sites you bring to advertisers. Our success is tied to yours. We look forward to partnering with you for the long term, and remain dedicated to helping you succeed.

Sincerely,

Kim Scott
Director AdSense Online Sales & Operations

Google Inc.
1600 Amphitheatre Parkway
Mountain View, CA 94043″

If you’re not paying attention, it may seem as if the cratering economy hasn’t stopped the steady stream of start-up funding announcements.

Today, for instance, we learned that online music distributor TuneCore has raised $7 million, while CrispyGamer, a newish videogame site, has raised $8.25 million from J.P. Morgan’s Constellation Ventures.

But don’t be deceived: Almost all of the deals you’ve read about recently, as well as the ones you’ll see for the next few weeks, were closed earlier this fall.

If you want to get a sense of why these announcements will slow to a trickle going forward, scan down through VentureBeat’s discussion of CrispyGamer’s business.

Let’s leave aside the basics. The site wants to make a name for itself in the crowded world of videogame review sites by offering high quality reviews, but it’s not clear that CrispyGamer’s reviews are much different than its peers, and it’s not clear that readers are making the distinction either.

Instead, focus on the dollars, from the VentureBeat report:

Right now, the site isn’t commanding huge ad rates. It gets about a $2 CPM (cost per million, a measure of the amount of money that comes in for every 1,000 readers). Just a month ago, it looked like it would get $8 CPMs, but the economic downturn is taking a toll. CrispyGamer relies on a half-dozen ad networks to feed it the ads.”

Assume that the CripsyGamer folks, like most publishers, are inflating their advertising rates (and traffic, too) for public consumption. It’s still telling VentureBeat that its ads have been marked down 75 percent in the last month.

Yikes.

The upside, I suppose, is that CrispyGamer has advertising revenue, period. There are plenty of ad-supported start-ups that have yet to get around to actually selling ads, and it’s going to be awfully difficult to start doing so now.

And, if you want to be really generous, you could argue that videogames are going to get beaten up less badly than other sectors during the coming recession/depression/meltdown/whatever. In theory, dudes will keep buying videogames, while they hunker down in their basements, because it’s cheaper than most other entertainment options.

But CrispyGamer also says it has a staff of 20 people, including five full-time writers (what does everyone else do there?). That’s an awfully big staff to keep afloat on $2 CPMs–and it’s hard to imagine that CripsyGamers’s backers imagined that’s what they were getting into earlier this year.

[Image Credit: Itjournalist]