Over the past two weeks, blip.tv was acquired by Maker Studios, while Grab Media was acquired by blinkx.

The deals share some similarities.  Today we’ll look at some of the lessons of the fate of blip.tv, which over the years evolved from a YouTube challenger, to a tech platform for content creators. Then, after narrowing down the number of providers it serviced from nearly a million to less than five thousand serialized shows, became a curated destination with scripted entertainment programs, with the objective of creating a TV-like cable offering online.  It had even replaced its founding CEO Mike Hudack with former Discovery executive Kelly Day.  When all was said and done, it had raised nearly $25 million, largely from Bain and Canaan.

Victim of Google envy

After YouTube had won the distribution game, but before it had successfully courted more premium rightsholders, blip.tv aimed at serving the middle of the market between Hulu and YouTube.

Before long however, YouTube leveraged its distribution and (via Google) war chest to move upstream and become the de facto home for enough of the content that mattered to the current generation.

Unlike the other early YouTube challengers like Veoh or Revver, blip.tv wasn’t overly funded early on, meaning it actually had a promising niche to fill with its popular player technology and infrastructure. (Full disclosure: My company used blip.tv’s player from 2007 to 2010.) I think even today, blip.tv’s player, content management tools and overall infrastructure may arguably be its strongest asset, and that is what mainly attracted Maker as it contemplates life outside — note I didn’t say after — YouTube.

But as it raised more institutional money, then like every other venture-backed company since 2003, it suffered from Google envy and went for it “all,” in this case all denoting a large ad-supported business.  Had blip.tv served as an alternative to Brightcove or Ooyala and morphed into a hybrid tech platform / media network that allowed some of its producers to pay for the service in exchange for more flexibility with regards to monetization, then I cannot imagine blip.tv growing into anything smaller than a $100 million to $200 million business.  But, because it wanted to own the advertising end of the equation, it took on too much risk as it sought the billion dollar payoff and tragically, failed.

Victim of YouTube

Blip.tv’s challenge, at the time, was that anyone who used its player also distributed to YouTube.  But by simultaneously refusing its larger content providers (who had more distribution usually) the ability to monetize independently, then it chased those in the arms of Ooyala, Brightcove, the JWPlayer, or YouTube.  To be clear, I am not saying blip.tv didn’t offer this under any terms, I am just saying the terms made it nearly impossible.

Eventually, as much as blip.tv added tools, it didn’t matter, since YouTube controlled the eyeballs, attracted the content, and advertisers flocked to it.

This is why, in my opinion, the board approved its last stand as a destination play, hoping that it could leverage the audiences that its content partners had built and convert it into a sufficiently large revenue stream.

Blip.tv could have perhaps outright acquired its largest content providers, many of whom were independent studios.  But as most were producers of scripted entertainment, I doubt that would have worked anyway: it’s tough to build distribution for one. Moreover, marketers and distributors will only underwrite content if there’s big name talent attached to it, which, in case you haven’t noticed, is Hulu, Yahoo and AOL’s playbook (and of course, in the past 18 months, YouTube’s, though it’s scaled that back a bit).

While content is more in vogue than ever, it’s certainly true that YouTube provides marketers with far more reach.  So if one piece of content lives on both YouTube and AnyOtherSite.com, then marketers will invariably be drawn to spend their ad dollars on YouTube by targeting via audience and data instead.

For what it’s worth, blip.tv will give Maker a scalable player technology overnight, but Maker has to ask itself if it wants a larger piece of a smaller pie outside of YouTube, or a smaller piece of a much larger pie on YouTube — which, ironically, is the very same kind of question blip.tv had to answer not long ago.