Google CEO Eric Schmidt came out earlier this week saying that he hasn’t yet figured out the perfect solution for making money from online video. His comments come after Google’s earnings report revealed that the $1.65bn acquisition of YouTube is yet to reap the kind of financial rewards that were hoped for.

But across the board, advertising in online video is something that still hasn’t been addressed properly, and the PCTV market is going through an interesting phase. Lack of content has already forced the once heralded Joost to retreat to the US and niche content areas. Hulu is doing well with content, but finding many of the same issues with advertising as the rest of the market. Meanwhile others such as Vuze are hoping that a technology advantage in delivering high-def content will help them gain cut-through.  

But while different online video providers are fighting to carve out their own niche, none has yet addressed the major issue for driving advertising revenue - and that is finding a genuine format and solution that works for advertisers - and educating them about it.

Schmidt was typically cryptic about what answers Google has planned saying only that top secret new products would be launched this year and that the advertising format - whatever it is - will be valuable to consumers as well as advertisers themselves. He insisted they will go far beyond the in-line text ads, overlays and top and tail ads that are already common with online video.

 Until then, plenty of others are just playing catch-up and trying to squeeze more value out of a model that is far from perfect. Warner Bros has just announced that it will offer its DVD film titles online, on-demand on the same day they release the DVDs, which is progress, but a long time coming… Will Google come to the rescue?

Once the darling of web TV, Joost is apparently struggling and according to James Ashton at The Times, is planning a retreat after failing to attract enough users and worthwhile broadcasting rights. Ashton claims that Joost is set to refocus its ambitions from global domination, to just the US market.

Joost launched last year and enjoyed a monumental wave of popularity and hype courtesy of it being ‘The Next Big Thing’ from Skype founders Niklas Zennstrom and Janus Friis. With A-list backing it didn’t have to try hard to stir up a major buzz, but what it needed to do was follow through the very astute viral and seeding process with quality content that users would want to watch. I’ve played extensively with Joost and while it’s a nice, slick piece of software and is fun to play with from that perspective, there simply isn’t the content that can keep you glued to your screen.

The Web TV market is burgeoning. According to a new report published this week, the web-based TV viewing audience is growing steadily and now nearly one in ten of all broadcast and cable TV shows in the US are being viewed online. The authors of the report, the Convergence Consulting Group estimate that 9 per cent of all full-episode TV viewing was done online in 2007, 50 per cent more than in 2006 and expects that to grow to 14 per cent in 2008, 19 per cent in 2009 and almost a quarter of all viewing in 2010.

The consumer demand is there - and of the tens of web TV services to be launched in the past year, the stand out winners have been BBC’s iPlayer in the UK and News Corp/NBC’s Hulu in America. The secret to their success? Rights and access to content that is at least as good as what is available on traditional television.

So what now for Joost? unless it’s happy to become a niche player in the US, it will need to imminently align very closely with a major content owner. And for the rest of the market? well in the UK at least, nobody has yet taken on the challenge of convincing the marketing and advertising community of the opportunities and effectiveness of web TV as a channel to carry their messages - whoever manages to align themselves first as the leader and expert on web TV advertising stands to gain big-time.

Beleaguered British broadcaster ITV is peddling fast to catch up with the rest of the digital world by announcing a deal this morning with Bebo to show its ITV2 programming on the social network. The move comes as ITV struggles with a decline in global content revenues and Michael Grade is increasingly waking up to online as the new distribution channel, but anything ITV has produced in terms of its online video player thus far lags so far behind rival BBC’s iPlayer.

The Bebo deal is interesting on a number of fronts - it’s cheap and arguably quick to deploy as a bandage measure to help stem ITV’s hemorrhaging younger viewers - an increasing number of which are getting all the broadcast content they want online and on-demand. Secondly, given that ITV owns Friends Reunited, you have to ask why it chose someone else’s social network as a digital route to market…

Despite insisting he is ahead of where he expected to be, ITV’s shares have fallen more than 20 per cent since the start of the year as Michael Grade struggles to turn the corporation’s fortunes around, and to clearly articulate the corporation’s digital strategy. Let’s hope when it is finally revealed it is not ‘digital on ice’… and in the meantime Holly Willoughby can continue to keep ITV’s weekend end up, but for how much longer?

MTV is to release the new Jackass movie entirely online on 19 December in a partnership with Blockbuster. Beyond milking the Jackass franchise for as much as it’s worth (and well beyond its sell-by date - those guys were only ever REALLY funny before they got rich) it’s an interesting move for Blockbuster which finds itself on the back-foot, trying to catch up with the web TV boom and the impact on-demand TV will continue to have on its retail presence footfall.

It’s also a big deal for Paramount in general as it tries to understand more about online as a distribution channel, rather than relying on the old tape and DVD models. Hollywood has been slow carve out the online opportunities in its favour - even slower than the music industry - but the fact remains that media audiences are fragmenting and online TV services like Joost, Veoh, Babelgum and Vuze continue to swell their viewer numbers. The challenge for the online TV services is to attract the advertisers as the medium wrongly retains a ‘cutting edge’ scepticism among the major media players.