Back in October, in the context of Larry Lessig’s tongue-lashing of YouTube as a “fake sharing” site because it didn’t allow remixing, Tim O’Reilly pointed out:

“We don’t have the same free tools for managing and editing video that we have for photos. If Adobe had a lightweight Flash authoring environment that could be deployed as easily as YouTube’s Flash sharing tool, that could bring video on the web to a whole new level…”

As a result of that comment, I just got a preview of an as-yet-unnamed new product from Adobe that allows video sharing sites to provide editing tools to their users. I’ve learned that PhotoBucket (which, despite their name, is also the #3 video sharing site after YouTube and MySpace, with 35-40,000 videos uploaded per day) will be rolling out this functionality to their pro users early next week, and to all users by early March. Editing functionality is basic: you can choose selections from various clips, splice them together, add photos, captions, and a simple soundtrack.

The functionality is pretty basic. Both Photobucket and Adobe are reaching out to the millions of users for whom even Premiere Elements or iMovie are too much. And they may well be right (though I hope to see more of the amazing features of Flash video, like layers and more complex soundtracks, added in future.) In our conversation, Alex Welch, the CEO of Photobucket, talked about the hunger that their users have for online editing tools.

In terms of business model — for Adobe, it’s licensing to folks like Photobucket, though they may also introduce their own hosted service, and they hinted at revenue sharing rather than straight licensing being the key to their business model. For Photobucket, revenue will come from advertising during the creation process. There will be no advertising introduced into the created video stream. He pointed out that users are far more engaged when creating and managing content than when just viewing it (as anyone who reads Kathy Sierra knows!) “Advertisers are looking for more than just standard IAB units,” he says. Here there will obviously be a huge opportunity for advertisers to offer branded video libraries as components for remixing. The host site sets the policies about how the video is branded and monetized.

Look for availability from Photobucket next week. And Adobe said that deals with other providers are in the works, but didn’t offer any names. If I were you, I’d get in line. Hats off to Geoff Baum and Lalit Balchandani, the creators of the product.