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A large part of the potential in this formula is the practical matter of building a more inviting interface to what has already proven to be a blockbuster market: targeted advertising using a highly categorized video library with considerable reach (is it obvious I'm referring to Google/YouTube yet?)
I consider Jumpcut one of the best alternatives to YouTube at the moment. The lack of good online video editing and general under-education are what is keeping the video rage from going to the next level - if only because it’s tedious (at best) and impossibly complex (at worst) to produce video.
For a detailed review of Jumpcut: http://www.vibetechnology.com/vt/2006/11/04/mix-and-edit-media-online-with-jumpcut/.
One other possible revenue source: a bridge between this kind of service and pro/offline editing with tiered subscription offerings.