As anyone who has partied too hard knows, you can have too much of a good thing. China's video-sharing sites have been partying like mad for the last year. It looks like the party might be coming to an end. If so, you can bet a wicked hangover is just around the corner.

Sophie Taylor, who covers the technology and telecommunications scene in China for Reuters, has written a sober article on how investors are starting to turn cold on China's once can't-miss legion of video-sharing sites:

China's video-sharing sites, which blossomed last year after Google bought the top online video-sharing site YouTube for US$1.65 billion, are struggling to build convincing business models, since the more popular they become, the more bandwidth costs tend to balloon as traffic gets heavier.

Some private equity houses also say too much venture capital money are chasing too few deals in China, especially in the technology sector, driving up project prices and prompting investors to broaden their horizons in search of higher returns.

"We recently invested in non-IT sectors, where the prices can be much more reasonable," Chen Hao, a managing director at Legend Capital, told a forum recently.

Compared to YouTube, Chinese video-sharing sites such as Tudou.com, Yoqoo and Rox.com.cn command only slivers of the country's vast online market. They also face yawning gaps between their large inventories and low ad revenues.

"The entire consumer Internet category has received a huge amount of funding, and everyone is struggling to get revenue," said an entrepreneur with a decade of China experience in the consumer Internet field, who has worked with a major portal.

"What you're seeing now is companies who normally invest in tech, Internet concepts, they're also trying to get into the offline space," he added.

Most small firms risk extinction unless they diversify or join forces with other online firms in China.

The article says there are between 400 and 500 video-sharing sites in China. Six months ago we were whistling through our teeth at the thought of 100.

So some brutal consolidation is ahead. But is this the end?

Danwei's Jeremy Goldkorn, who also points out that China's video-sharing sites collectively make about zero dollars, still see a bright spot because of the niche they fill in China:

[There] is something about China's video-sharing sites that makes them much more interesting than their American counterparts: Broadcast TV in China is really boring.

There is no HBO, no Fox, no CNN. China's MTV is lame, and so is Star TV. Young Chinese people can have a lot more fun on Tudou.com than they can by watching any broadcast TV channel. As long as China's video-sharing sites have the cash to keep going, they will eventually find ways to make money off their audience--brand advertisers in China will need some time to get onboard, but when they do, they will follow the young people who no longer watch the idiot box.

He's right about TV in China.

Meanwhile, David Wolf at the newly redesigned Silicon Hutong, says that "video sharing looks like a typical Chinese 'one guy got rich doing this so we can, too' pile-on." It wouldn't be China if that didn't happen.

As for me, I think that some consolidation would be welcome, but that regulation is the biggest long-term threat to the video-sharing sites. The very thing that has made them interesting has been the willingness of Chinese Internet users to upload all manner of material that wouldn't pass muster with China's incredibly staid television broadcasters. But if the Government decides that video sharing needs to be a little more "civilized", that entertaining stew of homespun celebrity, copyrighted content and out-and-out pr0n could find itself being boiled into something a lot blander.

And the Government is certainly in one of its tetchy phases with regard to the Internet. Last week publicized 10 major investigations into various kinds of Internet crime. Front and center in all of this is a growing government preoccupation with that old Internet bugaboo, pr0n:

"The boom of pornographic content on the Internet has contaminated cyberspace and perverted China's young minds," said Zhang Xinfeng, vice minister of MPS.

In the next six months, Zhang said, the ministries will crack down on illegal online activities such as distributing pornographic materials and organizing cyber strip shows, and purge the Web of sexually explicit images, stories, and audio and video clips.

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"The inflow of pornographic materials from abroad and lax domestic control are to blame for the existing problems in China's cyberspace," Zhang said.

We've been through it all before, of course. Just a few months ago, Hu Jintao was vowing to purify the Internet. It will remain a convenient proxy for many of China's social miseries for some time to come. Meanwhile, the video-sharing sites roll on as merrily as they can. Unless, of course, they run out of money.