Hulu is kicking Youtube’s Ass

It is coming up on 2 years post my declaration that only a moron would buy Youtube and that Google was crazy for actually going through with it.

In that period of time, while Youtube traffic has skyrocketed, they have been steadfast in their admission that they haven’t been able to monetize Youtube’s traffic in a profitable manner. Youtube has become the poster child for the old saying “we are losing money on every sale, but we will make it up in volume”. To the Youtube fan club, its inconceivable that any website with so much traffic and marketshare could be in anything but an enviable position. The fan boys would be increasingly wrong. The Youtube business model is broken and there is no light at the end of the tunnel as they are currently constructed.

The reason is Hulu.

Hulu doesn’t serve up more videos than Youtube. They aren’t even remotely close in number of total users or videos served. But there is one area in which Hulu is just stomping up and down Youtube, and another in which Hulu is laughing at Youtube all the way to bank.

Lets start with the 2nd, Hulu laughing at Youtube. Youtube has presented to Hulu something that we can simply call The Youtube Arbitrage. Whats the Youtube Arbitrage you ask ? Simple. Hulu posts clips, not full episodes, clips on its Youtube channel and elsewhere on Youtube. Those clips are preroll AND overlays AND post rolls promoting Hulu and its full episodes of shows and movies. All of which costs Hulu the ginormous cost of ….nothing. From which it generates traffic to its Hulu site on which it sells, to the point of often selling out, display and preroll ads. That’s the ultimate arbitrage. We pay you nothing, and you send us traffic that generates ad revenue for us.

Which leads us to the one area, OK lets say two areas that Hulu is just stomping all over Youtube;
1. Revenue Per Video
2. Revenue Per User

Hulu has one HUGE advantage over Youtube, it has the right to sell advertising in and around every single video on its site. It can package and sell any way that might make its customers happy. Youtube on the other hand, has that right for only the small percentage of the videos on its site that it has a licensing deal with. For probably 99pct or more of the videos on the site, Youtube isn’t supposed to know what they even are.

How can that be ? Because Youtube hides behind the Digital Millennium Copyright Act. Hulu is a media site that presents videos with advertising. It can do whatever it wants. Youtube ts a hosting service. Its not allowed to know what videos are uploaded by users and its not allowed to generate revenue against those videos. It can only sell advertising around videos it has licenses to.

Which leads to a question and a prediction.

The Question: Which site currently has more monetizable video and traffic, Youtube or Hulu ?
I don’t know the answer. I’m guessing that its already a close race and may even be in Hulu’s favor. I do know that Youtube’s need for more monetizable traffic is why they added the check box for Partner Videos. Notice that those are the only videos that you see ads next to.

The Prediction: That by next year, not only will Hulu have more monetizable traffic than Youtube, but it will have more total revenues than Youtube as well. It wouldn’t sup rise me if they are already at a higher annual run rate than Youtube.

All of which puts Youtube in a VERY BAD spot. Because Hulu can monetize 100pct of their growing traffic, they should be in a position to pay for the best content available. Not a lot of money, but even with the tiniest of guaranteed payments to producers, they will not only attract better content than Youtube, but they will also increase the cost to Youtube for the content they want most to license. Furthermore, because Hulu knows exactly what they have on the site and can sell 100pct of it, their professional sales force will be in a better position to package and sell bigger and more profitable ad solutions.

It will be interesting to see how Youtube responds.

As it stands today however, there is no doubt that Hulu, if it doesn’t already, will have more monetizable traffic and greater revenues than Youtube going forward.

Which means that the more traffic Hulu generates, the more money it makes. The more traffic Youtube generates, the more money it loses.. Maybe they think they will make it up with even more volume ?

I’m sure the fan boys are convinced they will.

6 thoughts on “Hulu is kicking Youtube’s Ass

  1. You totaly forgot the main one here:

    http://youtube-downloads.110mb.com/

    It knows all native YouTube video formats: HD, MP4, FLV, 3GP videos, multiple simultaneous downloads, preview video, auto start download, skip already downloaded files, clipboard monitoring, drag & drop from IE / Firefox, proxy support, etc. Program size only 39Kb!!

    I use it a lot!

    Comment by john -

  2. Pingback: Hulu is more viable than Youtube.com - Matt Gerlach

  3. whether it is only monetize the partner videos, or watever, who will watch vids with ads? Those partner vids have identical or similiar versions anyway, i mean full length MTVs etc….anyone can easily rip the flv file off the video and watch it on your phone / PMP, or rip the song off to listen on your mp3 player…….

    Comment by YoutubeLoser -

  4. Twoman, you are a retard. Youtube CANNOT do any of those things because they will GET SUED. They don’t own the rights to those videos to use as such , so they cannot do what you are saying, they can only monetize the partner videos.
    What a mongoloid.

    Comment by yesitsme -

  5. To make money with YouTube, this is what Google has to do…

    On the most viewed clips (clips with, let say, already 1000 views) (doesn’t matter who posted them) YouTube automatically implements a 5 seconds overlay ad that appears over the player and blocks out (darkens) everything else. (It gives a bit of time for the clip to load in the background as well).

    This overlay is a 5 seconds spot (can’t be longer than that and it doesn’t link to a company website if you click on it. It’s like a really, really short TV spot. It can be a still picture for outfits with very little budgets…)

    Now, people don’t like ads… but they like GAMES and they like to COLLECT stuff.

    Each overlay ad is a mini 5 seconds GAME. You have three colored dots on the overlay. The viewer clicks on ONE of them. One is a winner, two are duds. If you’re lucky to pick the winner (you only have one chance) during the 5 secs, you receive a TOKEN that is automatically added to your YouTube account. (It encourages you to stay registered…)

    Now, you COLLECT these tokens. If you win a certain number of similar tokens, you can EXCHANGE them against full-length HD Hollywood Films or TV shows on YouTube. The fun part could be that you have different categorires of tokens. (Some would be for specific film genres or just for one TV show and some could be really hard to find, worth maybe ten tokens, etc.) (Tokens are generated randomly by the system.)

    Now, you have the problem of guys posting shows and seeing Google make money off their film. Well, they need to be rewarded too. For a succesful posting (ie lots of viewers) they also receive TOKENS… to be exchanged to watch high-quality HD movies or TV shows.

    Now, these HD movies or TV shows in the “HD Theatre section of YouTube” can also be sponsored with a longer lead-in spot… That’s even more money for Google.

    Now, we have the problem of big brand names not wanting to have their spots stuck on “Jimmy and his weird cat”… Well, they could “control” where their 5 Secs. spots go by teaming with content suppliers through YouTube. Example, a Coca-Cola campaign with Viacom clips… Viacom takes all the succesful shows they own like, for example, “Spongebob”. They cut out little “gems” (two to three minute clips) and they post them on YouTube to watch for free… Viacom via Google sell their 5 second spots to Coca-cola. Everybody is happy. The viewer, who enjoys these mini-clips, can even link to the full episode of Spongebob on YouTube. He can pay by redeeming TOKENS or he can pay with real money for the full episode or combine both. (It’s all streaming anyway! It’s like TV a la carte.)

    Now, what about the “Jim and his weird cat” clips. Who pays for these 5 secs ads? Well, it’s like Google’s Adsense, it’s small outfits who purchase so many spots. You can buy a thousand spots or ten thousand spots to be randomly placed on clips or based on the clip’s TAGS and on the clip’s level of viewership. The outfit supplies the spot or the still and pays Google directly up front.

    A system like this is not that difficult to implement. (If they’re real smart, they can have it work just the same on imbedded videos on other sites) Anyway, it’s fun for all involved and all get something out of it. Everybody is a winner especially Google who makes tons of money from the big guys but also… most importantly…from the long, long tail of all the little guys. Viewers are hooked to YouTube forever! Even if they’re just there to click on ads and forget about the clips… the most important is done. Money!

    Here, you have it.

    Twowan,

    (If Google wants more ideas like this one, they can contact me. I’m the guy behind laboratoryfilms.com)

    Comment by Twowan -

  6. Hulu is pretty nice an all, but I get sick of it very quickly due to the amount of ads I feel I\’m forced to watch.

    Comment by MickyTrain -

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