Updated: Zencoder Raises $2M for Video Encoding in the Cloud

Updated. Startup video-encoding service Zencoder has raised $2 million for its cloud-based service that lets users get their videos ready for presentation and delivery via web or mobile apps. Investors in this round include Andreessen-Horowitz, Ignition Partners, SV Angels, Lowercase Capital, Founder’s Collective, 500 Startups, and individual investors such as Matt Cutts, James Lindenbaum, Orion Henry, Adam Wiggins, Wolfgang Buehler, Mike Bollinger and Neil McClements. Zencoder is the third second cloud-based video service its founders have launched; they founded developed FlixCloud for video-compression service On2 Technologies in 2008, which and when Google bought On2 for $106 million in 2009 and discontinued FlixCloud, and then FlixCloud, which has been folded into Zencoder it chose Zencoder as the partner of choice for FlixCloud customers.

Zencoder’s service currently runs atop Amazon Web Services’ (s amzn) cloud computing infrastructure, which provides the company more than just cheap, scalable computing power. Founder and CEO John Dahl said there’s a real value in being close to Zencoder customers to reduce the latency of transporting their large video files over the Internet, which is why Zencoder has servers in each of AWS’s global Availability Zones. He added that AWS also is a natural fit because many customers store files in the Amazon S3 object storage service, which further reduces both latency and bandwidth costs. Zencoder isn’t married to AWS alone, though, and Dahl said it’s willing to host its encoding services on additional cloud platforms if they’re technically mature enough and if there’s a high-enough degree of customer proximity.

Zencoder does take advantage of on-demand computing power, though. Dahl said the company uses the fastest Amazon Machine Images available (although it doesn’t use GPU instances for a variety of reasons) and typically runs between 15 and 150 virtual servers at any given time.

There is no shortage of competitive services (just search for “video encoding service”), but Dahl said Zencoder tries to distinguish itself on performance and technology, including support for any type of mobile encoding and support for both Flash and HTML5. It also offers an open-source HTML5 video player called VideoJS that customers can embed in their sites. Whatever service one might decide to use, the cloud is changing the economics of video encoding. Zencoder, for example, offers a variety of flat-rate pricing plans, as well as an on-demand rate of just 5 cents per minute of video output. Among Zencoder’s customers are TwitVid, PBS, Posterous and CollegeHumor (s iaci).

For all these reasons, Dahl said, “We think cloud is the future of just about everything when it comes to video infrastructure.” He’s right on about that. Apart from the wide range of cloud-based video-encoding services, cloud computing has also enabled other popular video services. One notable example is Animoto, makes custom video slideshows set to music, and which was an early case study for cloud scalability when its service went viral overnight a few years ago. Animoto now uses Amazon GPU Instances to offer on-demand 720p HD videos for just a few dollars.