Vuclip, a mobile video search and delivery startup has raised $8 million in its Series C round of funding, from New Enterprise Associates (NEA) and Jafco Ventures. The two entities had previously invested $6 million in Vuclip’s last round of funding, in September 2009.

What Is the Funding For?

There’s no indication in the note, of the monetization of VuClip – it has monetized by serving advertising, and once had a deal with mKhoj (now Inmobi). There’s little or no mention of what exactly VuClip will use this money for – it says that it will expand video analytics for advertisers and content owners, but just serving a large number of videos across devices must be expensive.

I’d be surprised if advertising can adequately cover its content repurposing and delivery costs (more on repurposing below), particularly since VuClip claims to have seen a rapid increase in usage – that it took 31 months to serve up its first billion videos, and only eight months to reach the second billion; there’s been an increase in video sharing among mobile users, which could have pushed consumption. More the consumption, higher the costs.

What VuClip would want, as we had mentioned earlier, is data revenue share from telecom operators, since video increases data consumption and revenue. In a 3G environment in India, video consumption might increase, and lead to an increase in VuClip’s costs, as well as operator data revenue. Unlikely they’ll get anything from telecom operators, though. VuClip has mobile partnerships with Bharti Airtel, DoCoMo and in Vodafone (India), Maxis (Malaysia), Telkomsel and XL, as well as with content providers like The Associated Press (AP), Billboard, Falcon Interactive, and Times of India*. It also pushes Video Alerts.

Repurposing Video & India’s IT Act Rules

VuClip essentially repurposes videos at the back end, making them compatible for multiple types of handsets. VuClip CEO Nickhil Jakatdar says that they’re delivering to 5400 devices in 200 countries. For example of how VuClip delivers content, see the screenshot that I just took, of a video apparently uploaded on Rediff:

For low bandwidth connections, VuClip makes it easy to consume content – dividing content into small parts so you can view it bit by bit, listen only to audio, or changes in resolution.

This makes consumption of web-based content much easier, but there’s a flip side to it: when you click on any of those clips, the content is downloaded on your handset. Much of that is user generated content, some of which could be defamatory.

Because VuClip is actively repurposing and splicing the content, under the rules for Intermediaries for the IT Act 2008, it could possibly be seen as editing the content, and therefore may not have Safe Harbor. The relevant rule: download here, see page number 13.

* Disclosure: Indiatimes, owned by the Times of India, is an advertiser with MediaNama