Hulu and YouTube: Methods of Monetization!

Article By: Joshua ‘The Red’ Russak (Red@aclion.com)

I was recently reading a Mediapost article in their Online Video Insider Publication where they addressed the question: “Can we reach television-sized audiences using online video?” And they continued to say “The answer is, unequivocally, yes.”. That means a lot for the monetization efforts for online video. In my recent article: >Online Video – Q2 Tells All, According to ComScore, Internet users in the U.S. watched 11.5 billion online videos in March 2008, up 13% over February 2008 and 64% year-over-year. And I continued to point out that the IAB is attempting to standardize the monetization of online video. Until that “standard happens” I like to keep myself up to date on what big video networks are doing now, pro and user-gen alike. I have to admit, each company has made their own attempts. For the purposes of entertainment, I chose YouTube and Hulu and covered some of the efforts made to “monetize” their constantly growing database of video:…BUT, before I go ahead and explain why, I have to point out a very entertaining and new way to monetize online video: As covered in the NYTimes article “Coming Soon To YouTube: My Face-Lift“, they have taken online advertising to a new and rather nauseating level. Plastic surgeons are offering patients free/discounted services in return for posting their operations on YouTube. The catch: They have to write a GOOD REVIEW and post a link to the surgeon’s web-site.According to the New York Times, more than 6,400 videos of Botox, breast augmentation and Lasik appear on YouTube alone. (Article Here)
And that completes my User-Gen Coverage. Now, if you’re a hungry online video addict, I suggest Hulu. I recently started “Arrested Development” on Hulu and it has been an eye opening experience comparing their “monetization” methods.
The site itself has been out of Beta for 3 months now, and in terms of ranking, they ahve already made their way to Nielsen’s top-10 video sites. In terms of turning advertising, they’ve served more videos in May than ABC.com.
AlleyInsider.com, one of my favorite online industry blogs out there (besides this one, of course), They “estimate Hulu will sell between $45 million and $90 million of advertising during its first 12 months — April 2008 through March 2009. By the time it pays off its content partners, it will book between $12.5 million and $25 million in net revenue. (Which isn’t bad for a start-up, actually.)” They have painted a map of how Hulu will get there in their posting, “Hulu: A Consumer Success But Still A Small Business” One quote I particularly enjoyed…

On the low end, we estimate that Hulu.com will generate close to the revenue generated by, say NBC.com, which is said to generate “tens of millions” in revenue this year. On the high end, Hulu would net $90 million in gross ad sales — in the same league as some estimates for YouTube.

It seems to me that both YouTube and Hulu have their challenges set up for them, both of which are worlds apart. I’ll follow them closely as we reach an IAB “standard”, but until that happens, just keep up to date and if you see anything out of the ordinary, let me know. E-mail me anytime at Red@aclion.com Now if you’ll excuse me, it’s my lunch break and I’m almost done with Season 1 of Arrested Development