How Hulu will beat YouTube

HuluLast month, Time.com named Hulu the #4 best invention of 2008. Hulu was bookended by The Lunar Reconnaissance Orbiter and The Large Hadron Collider. While this ranking seems to be a bit extreme, especially since Hulu was only the 31st best website of 2008 also according to Time, there is no doubt it has made a major impact in the distribution and monetization of digital content and online video.

Hulu was in-part created by NBC Universal and News Corp. as a response to the behemoth that is YouTube. The purpose of Hulu is to distribute their programs on their terms. While this was first met with some criticism, this is now for the most part non-existent. The behemoth that is still YouTube, still based in UGC, is now feeling pressure from Hulu, and as a response YouTube is scrambling to partner with traditional media companies like Metro-Goldwyn Mayer and CBS. YouTube is taking many steps to monetize its site (media partnerships to attract advertisers, sponsored videos in search results), but it seems like these steps are not enough. The Financial Times reported Hulu is set to surpass YouTube in revenues by 2010, the majority of this being advertising revenues.

So, what is the difference between the advertising opportunities on Hulu and those on YouTube?

I think the biggest difference is their ability to sell inter-roll and surrounding ad units. The programming on Hulu is the type of content audiences are used to and expect advertising to surround, so users are not immediately turned off by having to watch a couple of 30 second ads in order to watch a 30 minute show. YouTube, on the other hand, was built on 2 minute user-generated content. This short amateur content has, to this point, failed in having audiences accept advertising as part of it. Hulu succeeds because their content is something audiences have assigned high value to and except for a handful of videos, YouTubes content has very little value.

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It is incredible that Hulu is showing such strong growth from an ad revenue perspective with their advertising being so standard. Currently, the majority of the advertising opportunities are :30 inter-roll video units with an accompanying static logo. They have also been experimenting with giving the user a choice of watching a one-minute ad before the show or the standard :30 ads during. There is a huge amount of growth potential for advertising opportunities.

These opportunities being:
– Custom branded content
– Integrated sponsorships
– Advertiser channels
– Advanced targeting (I shouldn’t be seeing ads for women’s health products, especially when watching Son’s Of Anarchy)
– Integrated online/offline opportunities

Hulu has covered a lot of ground in a very short time. It will be very interesting to see how they continue to grow and especially interesting to watch this battle with YouTube.

EXTRA: 88% of Hulu users are opting to view a 2-minute ad before the content in exchange for no ads during the show…via adage

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