Unease about the future of digital formats has spawned numerous ventures. A year ago, Turner Broadcasting System unveiled Super Deluxe, a mishmash of comedy by both amateurs and professionals. United Talent Agency and the Web-based ad agency Spot Runner have formed 60Frames Entertainment, a ministudio that will produce gonzo film and video for internet dissemination, and, possibly, cable broadcasts. Its business model: Pay up front for content, then syndicate it.

Funny or Die is now part of a rapidly changing media landscape where more viewers—and more dollars—are moving online every day. Ad revenue for Web videos has swelled to $775 million, nearly double what it was in 2006; that figure is expected to double again in 2008. In its first three weeks, Funny or Die—patched together with just $17,000 in seed money from Sequoia—drew almost 3 million unique visitors, a figure that exceeded the monthly averages for the websites of such established smart-alecky competitors as Comedy Central, the Onion, and CollegeHumor, which hosts a “Girls on the Toilet” photo contest. “Running porn or party jokes or female nudity would clearly bring a lot of eyeballs our way,” says Chris Henchy, Funny or Die’s creative director. “But we’re into observational humor, not cheap laughs.” Not that he’s opposed to laughing cheaply. After all, an early name for Funny or Die was WetMyPants, and its well-stocked library includes the titles “Masturbation” and “The Vagina Whisperer.”

Part of what separates the site from other YouTube-like portals is a merit system that allows voters to banish unfunny videos to the “crypt” section of the site. Also, there’s an aspirational quality that comes from associating with Ferrell and McKay, who critique clips and pick their favorites. Pitch your gags on YouTube, and it’s as if you’re one of a million comic wannabes on some public-access channel; at Funny or Die, you feel like you’re auditioning for Saturday Night Live. “In the old days, to get the public to see your act you had to be in a sitcom,” says Zach Galifianakis, a club comic for whom the site has been a springboard to TV and movie appearances. “Now I can upload my most daring routines on Funny or Die and the whole country sees them. It’s become the premier site for professional stand-up comics, a comedy community.”

That community includes well-known performers enlisted by Ferrell and his posse. Bill Murray, Jenna Elfman, John C. Reilly, Jimmy Fallon, Jeremy Piven, John Mayer, and Henchy’s wife, Brooke Shields, have contributed cameos. And Funny or Die’s newest partner, Knocked Up director Judd Apatow, has ponied up skits. The celeb video that has come closest to inciting another Web frenzy is a parody of the Paris Hilton sex tape, starring Desperate Housewives’ Eva Longoria.

If the Web is a kind of short-attention-span theater, websites are perfect stages for byte-size screwball skits. Maybe too perfect: There have been more comedy portals than comics at your local Yuk Yuk Hutt’s open-mike night. The sites have tended to be as laughably laffless as they were unprofitable. This was especially true during the first internet boom, when videos were more likely to trickle than stream. “Downloading in 2007 is 100,000 times easier than it was in 1999,” says a talent agent familiar with Funny or Die. “Still, in eight years, nobody has figured out how to make money off comedy sites.” But with new media now siphoning off old media’s ad revenue at an alarming rate, the agent predicts that profits will come soon.

Among the old-media entries recently flushed are NBC’s DotComedy.com, Time Warner’s This Just In, and—perhaps most risible—Time Inc.’s Office Pirates, allegedly a satirical look at the workplace, which capsized after seven months.