Joost, once a very promising online video startup with very well-known founders and CEO, has announced it will be going through a transformation, closing down most of its operations and laying off the majority of its workforce. The service will continue as a white label online video platform for businesses looking to deploy their own video capabilities though this future looks bleak as, just yesterday, Yahoo decided to get out of the market by closing down Maven Networks, a startup it acquired for $160 million.

“After much analysis, we have decided to change our focus and to start providing white label online video platforms for media companies and distributors. We have built a solid technology platform that there is demand for in the marketplace, and look forward to this new chapter for our company. At the same time, we’ll continue to operate Joost.com and its associated video applications,” CEO Mike Volpi wrote on the company blog.

Joost was launched at the beginning of 2007 and came with a pedigree few startups could boast. Founded by Niklas Zennström and Janus Friis, the people responsible for the highly successful Kazaa peer-to-peer sharing platform and Skype, the voice chat client and now the biggest provider of international calls in the world, the site looked poised to take on YouTube as the number one online video provider.

However, a series of mistakes and unwillingness to adapt to the market conditions meant that the video platform never really took off and by the time the changes everyone was asking for came it was already too late. At first the videos on the site were only available through a downloadable client and then they were streamed using P2P technology. This and the fact that videos couldn't be embedded and shared on other sites turned off many of its potential users and by the time Joost was relaunched with an all Flash interface late last year YouTube and especially Hulu were just too strong to be challenged.