I remember my brother showing off a new device in the late 1990s that let him navigate the Internet on the television. Back then, there were no dogs riding skateboards on YouTube or NBC dramas on Hulu, but the technology from WebTV appeared to be a breakthrough in the convergence of the two mediums.

The frustrating thing about WebTV was that the dialup connection was so slow–at times crippling–that you often sat on the couch waiting minutes for a page to load. Plus, the resolution on TVs then was far from hi-res, and the lack of multimedia on the Web made the task rather boring.

Fast forward more than a decade: While you can now search the Web at lightning speed on the tube, watch television shows online at will and view Internet videos with clarity on any screen, companies are still struggling to come up with a business model for the Internet-connected television market.

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Microsoft Corp. (MSFT) has closed the technological gap with Adobe Systems Inc. (ADBE) in a battle over software for adding video and animation to Web sites. But Microsoft’s efforts to win customers in the market are moving much slower.

Over the past two years, Microsoft has poured resources into its technology for online video and animation–dubbed Silverlight–and has boosted its ability to deliver high-definition video with the technology. Silverlight is positioned as a rival to Adobe’s technology, which is known as Flash.

While Microsoft has nabbed some marquee Web customers for Silverlight, including the National Football League, most popular video sites like YouTube and Hulu continue to use Flash. That’s because the Adobe software is much more broadly installed on computers than Microsoft’s technology.

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In the past few months, two of the highest-profile and most heavily-funded online-video startups–Veoh and Joost–have given up trying to compete with Hulu and YouTube and have now drastically switched their business models in hopes of surviving.

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Metacafe, seeking to reach more “media-snacking” consumers, is launching a section of its video site devoted to short clips from “Nurse Jackie,” “Weeds,” “Big Brother” and other television shows.

The Palo Alto, Calif., company, which is funded by Highland Capital Partners and DAG Ventures, focuses on what it sees as a middle ground between YouTube and Hulu–short-form videos that are professionally produced or poised to go viral–said its chief executive, Erick Hachenburg, a former Electronics Arts (ERTS) executive.

YouTube has a high percentage of personal or response videos, he said, while Hulu is where consumers go to watch an entire TV episode. Metacafe.com, in contrast, is pared down to channels for movie trailers, sports clips and music videos. It had about 7.3 million unique video viewers in April, according to comScore (SCOR), compared with Hulu’s 40.1 million uniques.

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Independent developer Paul Yanez, who seems to make a game of adding functionality to web video platforms whether they like it or not, has built an Adobe AIR app for Joost called the Joost Media Player.

This is delightfully ironic for a number of reasons.

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Hulu, the online TV service launched two years ago by Fox and NBC, has enjoyed incredible success with viewers–too much, it may turn out.

Two weeks ago, comScore’s report that Hulu had pulled into the top three streaming video sites was quickly followed by news that Disney (DIS)–the corporate parent of ABC and ESPN–was taking a stake in the venture.

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I am in San Francisco at the ad:tech conference today, and got up early (easy given the time change) to go hear Jason Kilar, CEO of Hulu, give his keynote address this morning. And while I enjoyed the address, I walked away feeling like we didn’t really hear a totally true story about why Hulu is enjoying so much success.

Let me state at the outset, lest the comments to follow read as “bashing” Hulu–I like Hulu as a user and am genuinely impressed with both the product and the business accomplishments Jason and his team have achieved.

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When a guy like Steve B. Burke likens TV viewers’ stampede online to a “wildfire,” you know the cable industry is feeling the pressure. Burke is the president and chief operating officer of Comcast, America’s largest cable distributor. He notes that Hulu.com and other popular Web sites that offer access to TV shows and films attract a fraction of the viewers that cable does. But Burke acknowledges that he and his rivals can’t afford to sit still–not when Americans can get many favorite shows online for free.

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Hollywood and the major record labels have always enjoyed a love-hate relationship with new media, alternating between roses and lawsuits for online entrepreneurs, if you will. Lately, it was looking a little like love was going to win. Hulu, after all, had convinced its detractors that even big dinosaurs can get things right, and record labels had started to embrace services like MySpace Music and Last.fm. But like an alcoholic who just can’t resist that drink, big media looks ready to relapse.

There’s been a lot of bad news out of the so-called Music 2.0 space this week, with Imeem said to be in financial trouble, and Last.fm forcing some of its subscribers to cough up around $4 per month. There’s also a storm brewing in the online video world, where some networks have started to take their most valuable content offline in order to maximize traditional revenue, and platforms like Hulu are being forced to fight any attempt to bring online content to the living room.

Record labels used to be something like the suicidal canary in the coal mine for Hollywood, eagerly moving from one life-threatening disaster to another.

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Hulu is stepping up its global initiatives to compete for audience and advertising dollars overseas.

On Monday, the video-streaming site added Johannes Larcher to its executive ranks as senior vice president of international. Mr. Larcher must work with each content provider to negotiate international rights for each video. Hulu has more than 130 content providers and 1,100 TV programs and movies, and its library continues to grow.

Certain snippets of content are already available outside the U.S. Tuesday evening’s news conference with President Barack Obama, for example, will be streamed internationally.

Hulu is a partnership between General Electric’s (GE) NBC Universal and News Corp. (NWS), owner of Dow Jones, which publishes The Wall Street Journal.

In international activities, Hulu trails behind Joost, an independent start-up competing in the premium online content space. Joost has a localized site for the U.K. and is viewable around the world, though content availability varies from country to country.

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Is more always better?

Hulu has expanded its content library considerably since its launch a year ago. The Internet video site has grown from 50 content partners to more than 130 and has nearly 40,000 pieces of video.

Now, in addition to the full-length TV shows that made the site popular, it has an expansive, somewhat chaotic library. The site contains everything from two-hour feature films such as Universal’s “Liar, Liar,” starring Jim Carrey, to short instructional Web videos such as “How to Make Stuffed Crust Pizza.”

Andy Forssell, Hulu’s senior vice president of content and distribution, says the goal is to provide users and advertisers with more options. Hulu is a joint venture of General Electric’s (GE) NBC Universal and News Corp., (NWS) which owns Wall Street Journal (and AllThingsD.com) publisher Dow Jones.

Among the newest content partners is Condé Nast Publications Inc., the people behind magazines like Vogue and Wired. Videos from the company’s online destinations, such as Epicurious.com, a site for food aficionados, are now appearing on Hulu. They’ve added content from four sites: Epicurious, Wired.com, Style.com and Men.Style.com.

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In the online world, where sites like Hulu and TV.com give free access to content, sports video is somewhat of an anomaly. The leagues, networks and other rights-holders that stream live games are among the few mainstream businesses that have been successful at charging people for Web content.

If you ask the sports leagues why they can do it, many say it’s because of their product. There is such an abundance of sporting events that all of them can’t be broadcast on television. But somewhere, someone usually wants to watch those events.

Prices vary–the National Hockey League sells access for $159, while $19.95 gets you a season pass to Major League Soccer’s MLSLive.tv.

Earlier this decade, before YouTube became a household name, skeptics doubted that streaming sports would work. “People at the time said no one will watch video online. Even if they will, they will never pay you for it,” says Bob Bowman, chief executive of Major League Baseball Advanced Media, which operates MLB.tv.

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Hulu caused quite a stir this week when, at the request of rights holders, it shut down Boxee’s access to its streaming video platform. While many discussed the business implications of this move, some are ready to do more than just talk about it. One reader wrote to tell us that he’s gonna stop using Hulu altogether and go back to downloading TV shows via BitTorrent. Lifehacker editor Adam Pash apparently had the same idea, given his post entitled “How to Get Hulu Content on TV Without Hulu’s Help.”

Granted, so far this is all just anecdotal evidence. Chances are the move will cost Boxee more users than Hulu in the near term. However, these aren’t the only dark clouds on the horizon of Hululand; longer ad breaks and old media conflicts could turn people off Hulu-like streaming video platforms. Piracy, on the other hand, is getting easier and easier every day, with torrent sites and other unlicensed platforms just waiting to embrace Hulu renegades. Maybe it’s time to send the following memo to Hollywood: You can still blow this thing.

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When NBC Universal and News Corp. created Hulu, they gave the video portal a valuable but short-term asset: exclusive rights to distribute NBC and Fox shows outside of the media giants’ own websites.

From that base of content, Hulu.com has become the fourth-biggest online video distributor by unique visitors in January, behind YouTube, Yahoo and MySpace, according to the latest from Nielsen VideoCensus. In total video streams, it’s No. 3, with 232 million, behind YouTube (5.8 billion) and Yahoo (277 million).

But the exclusive part of that NBC-News Corp. deal lasts only two years, and Hulu knows all too well that the scarcity that helped it establish an audience (and brand) is going away soon. Hulu has never said exactly when the deal expires, but it’s likely within a year after the first anniversary of Hulu’s public launch, in March.

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GoDaddy’s famously risque Super Bowl ads always pull lots of eyeballs, but the company’s latest spots may have resulted in a little too much attention of the wrong kind.

Entrepreneur Brian Harrell, who manages hosting services for dozens of Christian churches and faith-based organizations and uses GoDaddy to host over 160 domains, says he’s pulled several of his clients off of GoDaddy’s servers after receiving numerous complaints about the company’s racy ads that aired during Sunday’s game.

“I know they’re trying to make sales, but that kind of content is not going to fly in the Christian community,” he says.

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