I understand if you don't share, but I'm just curious. I do transcoding at home from DVD to MP4 for place-shifting (I <3 Handbrake), but I'm thinking your customer would be some sort of video-hosting site. Are there really that many out there?
What kind of challenges have you faced wrt bandwidth?
You'd be amazed how many websites out there need something like this - tens and tens of thousands. Every website with an "upload" button that accepts video or audio files needs transcoding, plus many others. And since a site like Zencoder makes it possible to do complex things with video in 2-3 hours instead of 2-3 months, we open the door to a whole new class of video functionality.
Rather than setting up ffmpeg and dealing with the errors it can throw up, we just set up the upload form and Zencoder takes care of all the format conversions for us. If Zencoder can't decode it, it's safe to tell the client that the file is broken.