ScanScout, a Boston startup oft described as providing “AdSense for video”, will announce this morning that it has received a strategic investment from Time Warner.

The size of Time Warner’s investment has not been disclosed. However, CEO Doug McFarland claims that many of the benefits for ScanScout will come from the connections and opportunities created by its partnership with Time Warner, aside from the financial gains.

We covered ScanScout back in May. The two-year-old company’s software displays contextual in-video advertisements that are determined by three factors: surrounding page information, audio patterns in video, and imagery patterns in video. ScanScout’s software analyzes and weighs all three sources of information to determine which advertisements are most appropriate for a given online video.

With its investment, Time Warner joins First Round Capital, Angel Investment Partners, and General Catalyst Partners. ScanScout also announces today the formation of its board of directors, which includes representatives from First Round Capital, General Catalyst Partners, Time Warner, and Digitas.

McFarland cites YuMe and AdapTV as ScanScout’s most direct competitors.

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Cambridge, MA based ScanScout joins the fray. Founded 2 years ago, ScanScout launched recently and has followed up with an announcement of $7million Series A funding in a round led by General Catalyst Partners.

At first look, ScanScout’s video advertising product looks identical to what Google is testing with YouTube. Text ads are overlaid on the video and open video-on-video advertisements or external sites.

We don’t know a lot about the tech behind Google’s offering. I noted in my post covering the subject last week that the sample YouTube advertisements lacked context. ScanScout on the other hand has no question mark on the issue.

ScanScout technology scans each video and determines content, with ads delivered contextually to match each scene. Think of it as an Adsense for video because it’s exactly how it works, but on scenes as opposed to pages.

I’m yet to be convinced that text based overlays are the future of online video advertising. ScanScout argues that pre-roll and post-roll are regarded as dead by many because they “leverage an old paradigm that essentially ignores the consumer”, and yet this optional form of advertising can easily be ignored itself.

If in-video text advertising is indeed the future of online video advertising, contextual delivery is essential and ScanScout provides a product that delivers exactly that.

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