Canadian company Overlay TV has launched a platform to allow publishers to provide links over online videos to any web site. The venture capital backed start-up based in Ottowa aims to provide an interactive advertising opportunity and revenue stream that appears to be parasitic on existing online video publishing platforms.

“By linking publishers, viewers of online video and marketers, Overlay.TV is transforming user-generated video content from a passive vehicle for entertainment or education, into an interactive vehicle for commerce,” said Rob Lane, the chief executive of Overlay.TV.

The Overlay.TV platform supports streaming video from popular sites such as YouTube, Metacafe and MySpace. Publishers can overlay words or graphics on top of video and link to products or information on external websites. They can then publish the enhanced videos on their blogs and personal web sites, or share them in email or through social networking web sites.

Users are able to opt whether or not to see the overlays and would presumably need a compelling reason to do so. “By putting the user at the center of the online video revolution, Overlay.TV has enabled the fusion of consumer created advertising and non-intrusive, but active participation by online video viewers,” claimed the founder of the platform. “This has created one of the most compelling and comprehensive models in the online advertising industry.”

Overlay.TV completed an initial funding round in January to launch its online video advertising platform.

For many years, proponents of interactive television have proposed the potential of dynamically linking video hotspots to enable participation and transaction. The model used to be described in terms of clicking on Jennifer Aniston’s sweater to find out where to buy it.

Every now and then the concept resurfaces. While it was never destined to work in interactive television, it may make more sense in online video, although it remains far from an original idea.

The question in this case is whether online giants like Google will allow a start-up to establish itself in this space. Presumably the hope is that if successful it will become an acquisition target.

www.overlay.tv