Veoh is raising a round, claims to be pretty big and growing

Updated with more information from the company

Online video startup Veoh is in the process of raising a $40 million round at a proposed $150 million valuation and has hired investment bank Bear Sterns to help with the effort, Silicon Alley Insider reports.

San Diego-based Veoh is a distant competitor to market leader YouTube, but still claims to be growing at a healthy rate. The site features user-created videos, clips from partners such as the Independent Comedy Network, as well as content from large companies like Viacom. From what we hear, the company is well respected in the media world, partially because it’s made a point of forging partnerships with entertainment companies.

However, Veoh’s traffic numbers are contested, as they have been at least since the company raised $26 million round last spring (our coverage).

Last December, third-party analytics firm Comscore showed Veoh bringing in nearly 16 million monthly unique visitors worldwide, with only 3.5 million of those in the US. That’s versus YouTube’s nearly 250 million. Meanwhile, rival analytics firm Nielsen says Veoh received more than 2 million unique US viewers in December (not visitors).

[Update: Veoh tells me it has more than 23 million monthly video viewers worldwide, defined as people who started playing a video on the Veoh home site or on a Veoh video embedded in another site. It says that Nielsen’s panel may be missing large chunks of Veoh traffic, because the panel is comprised of the wrong demographic. It says that using a separate Nielsen tracking service, the web analytics firm obtained numbers much closer to Veoh’s own.]

Today, Spark Capital investor Bijan Sabet, who sits on Veoh’s board, writes that Nielsen’s numbers are wrong, after SAI cited them in its article.

Sabet says that Veoh’s internal server logs show 21 million unique monthly viewers in December, up from 2.5 million at the beginning of the year. He also says that users are watching more than 30 million hours of Veoh videos per month, now.

So maybe Veoh is pretty big, but like every other video company, it is trying to figure out how to monetize. Many startup rivals have also raised large amounts of money. Two examples: Last year, DailyMotion raised $30 (our coverage) and MetaCafe raised $34 million (our coverage). Hosting and streaming lots of videos gets expensive, and right now there’s no way to cover costs.

[Update: I asked the company about monetization. Veoh says the average user spends more than 87 minutes on the site per month, with much of the viewing happening during evening prime time hours. It says its audience presents great opportunities for brand advertisers.]