Online Advertising: Hulu Catching Up With YouTube?
According to the Financial Times, Hulu, the online video service backed by NBC Universal and News Corp. is slowly catching up to YouTube in terms of advertising revenue. Screen Digest's Arash Amel forcasts that in 2008, YouTube will generate about $100 million in the U.S., while Hulu will make about $70 million. By next year, however, Amel forecasts that both sites will make about $180 million, even though Hulu only has a fraction of YouTube's traffic.
Clearly, Hulu's content of professionally produced TV shows and movies generates more revenue per viewer and video than YouTube's user-generated content, which still scares advertisers (and especially brand advertisers) because of the unpredictability of the content.
Advertising on YouTube
Google has been trying to create a viable advertising solution for YouTube ever since it bought the service in 2006, but so far, none of these initiatives have really worked. Just last week, Google introduced two more monetization schemes for YouTube: monetizing embeds and allowing video publishers to bid for sponsored placement of their videos on the site. Whether these initiatives will have any major impact on YouTube's bottom line remains to be seen.
We should also add some caveats to these predictions: The current economic trends make short-term forecasts for online advertising a bit tricky. Also, as Henry Blodget points out, it is worth noting that Hulu shares a larger percentage of its revenue with its content providers than YouTube does, so YouTube will still be making more than Hulu in terms of net revenue.
Don't Count YouTube Out
However, YouTube will surely not capitulate and leave the market for TV shows and movies to Hulu without a fight. Google has already made a deal with MGM to bring full-length movies to YouTube and other content providers will surely follow.
However, while the user experience on YouTube for watching short clips is quite good, it can't match Hulu's player or video quality. If YouTube wants to get users to watch full-length TV shows on its service, it will first have to create a better user experience.
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It's incorrect to say YouTube is making more net. YouTube is actually lossmaking net - they've been making a lot of payments to keep content owners from suing, not to mention their recurring delivery costs. The same analyst firm actually said on C21Media that Hulu was on a 15% profit margin once everybody else was paid and delivery costs taken out ...
Prediction: The next-gen gaming consoles will bring together TV and movie streaming services to put a ton of pressure on both the traditional rental market and cable companies. I could see Xbox 720 partnering with Hulu + Netflix streaming, PS4 hooking up with YouTube, and potentially Apple building a gaming platform + iTunes (or maybe partnering with Nintendo). Along with a convergence of tv, movies, and gaming, the platforms already have a social network component that will bring together social media experiences that will create new forms of entertainment that cable companies simply can't match. Just like home phones were a no-brainer necessity prior to cell phone ubiquity, so are the days numbered for big cable.
IMHO, Hulu's incredible success is a big milestone in the inevitable digital entertainment convergence story.
Based on Compete.com data, Hulu has about 4MM monthly uniques. If you assume $100mm/year, that's $8.3M/month. This would be over $2/unique. Assume 10 ad impressions / unique and you get $0.20 per ad impression. That's a $200 CPM. Which isnt happening. They are no where near $100MM in revenue. this is bunk.
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