Sooner or later, you’ll visit many new pages using the DivX Web Player, and you’ll click a box, and from that point onwards DivX will just work, and you’ll join a rapidly growing userbase who have already done so.

The difference between the two formats is that although Flash might have high penetration on the desktop, that is the only place it has high penetration. In contrast, DivX also has very large distribution, but already powers consumer electronics devices everywhere. And once you start using DivX you find that the quality is better, and that you can play your content everywhere, and that you don’t have to install all kinds of crazy tools just to be able to download DivX files from a website in the first place. How many times have you gone to lengths to work out how to grab a flash video from a page?

Content is powerful, and DivX makes the content experience better in almost every sense.

As far as the Google toolbar goes, it’s not really an issue because DivX can always sell that ad space for another product or someone elses toolbar/plugin. If people don’t need google toolbar anymore, then they could just as easily sell an Alexa toolbar or bundle with another provider.

I also think that there are other ways that their partnership with Google can grow. Most importantly would be the use of DivX for YouTube and/or Google Video. If this happened, the revenue DivX pulls in from the bundled toolbars will start looking like peanuts.

But if grandma doesn’t even have to download a divx player because she belongs to the 97% of the people in this world that already have everything they need to watch their son’s video, then she would be the happiest person in the world by not having to worry about another freaking application she gotta download and install. That is the power of Flash. When, and I do not say if, but WHEN Flash get on devices (as JT suggested), like STB and TiVO’s etc, that competion for DivX is tough to being ignored by Mr. Greenhall.

Coming soon to a set-top box near you.

If flash finds a way to let consumers move that content around the home, then it would be a more realistic threat, but even then DivX has made too many in-roads to get frozen out of this market completely.

DivX isn’t selling the ablity to stream video, they are selling the ability for YOUR video to talk to other devices that you own. This is very powerful, if they can achieve enough of a critical mass. The more DivX media files that exist, the more powerful their monopoly over that consumer is. This is why licensing DivX in digital cameras is so important. If grandma needs DivX to watch videos of her grandson, she’ll take the time to download the software to get at them and DivX will gain another customer from the most powerful form of marketing you can do. The more media that DivX can control, the stronger their position gets.

Studies put the number of file sharers at around 8%. A large percentage of these are DivX files. Right now, legitimate or not there is more content available on DivX, then any other format. Manufactuers know this and are willing to turn a blind eye, if it means that they can tap into the percentage of the population that wants access to their DivX files.

With a billion cell phones sold last year, if DivX could just penetrate 5% of the total market, they would double their annual revenue with sweet sweet high margin cash. If DivX can ultimately acheive the same market penetration rates as they have in the DVD market, then the cash flows start looking really interesting.

The iPhone is going to be hot, but Nokia and Motorola aren’t going to just give up because Apple is so cool. They are going to turn to the most common media language and right now it’s DivX. Microsoft has built real inroads, as has flash, but DivX also gets a seat at the bargaining table and investors should be asking what that opportunity is worth. Considering how little DivX actually charges for each license, a manufacturer could support both flash and DivX, if that is what consumers demand.