We're in stage three of Internet video: syndication. Embrace it.

The Internet video market has expanded through three distinct but overlapping phases from a limited library of paid downloads to an expansive library of ad-supported content that is syndicated across the Internet. Yet, YouTube, whose product remains largely unchanged, has increased its audience share from three percent to 50 percent in two years.

Online video advertising will make up the majority of the market, accounting for $2.3 billion by 2012. Companies will have to balance reach and revenue share in maximizing value captured for content.

Networks and studios can take audience share from YouTube and begin to create viable revenue streams by moving beyond viral video into Internet television. That means offering branded, episodic, quality programming that taps into consumer desires around "chapterized" content, integrated video experiences, and unobtrusive advertising. Industry players must carefully monitor four emerging trends that could dynamically change the marketplace: streaming library size, YouTube content deals, exclusive distribution, and Web serials.

Teaser: Colleague Bobby Tulsiani's next big report goes by the working title of "Competing with YouTube." Clients can call us for early insights.