Hulu’s growing pains are emblematic of old media’s challenges and symptomatic of its pedigree.
Hulu is the free premium video site that was launched by News Corp. and NBC and today also includes Disney/ABC as a third parent. A bit of a disclaimer: WatchMojo supplies Hulu with a plethora of videos across multiple categories.
Let’s first look at Hulu’s pedigree to understand why this script ending should not have come as a surprise to anyone.
Too Many Cooks in the Kitchen?
According to Mediaweek: “Observers predict that the already complicated arrangement is likely to become more so, particularly given the prospect that NBC Universal may be sold to Comcast—which already operates its own online video site (Fancast) and has a markedly different philosophy regarding just how free TV content should be on the Internet.”
I’ve always feared that what led to Hulu’s quick ascent - access to great content - would in turn mean that its media owners would eventually bicker and have divergent opinions on strategy. After all, while Google’s YouTube is Big Media’s frienemy, over time, Big Media’s biggest enemies are one another as they vie for market share.
That is half of the equation.
Market Timing Never Works, You Have to Stick to Your Guns
Old Media makes decisions based on today’s conditions, which ensure that in a few years time, when the project has taken off, the conditions might no longer be conducive to their strategy and execution.
Case in point: Hulu decided from Day 1 to go free, this helped the company’s traffic take off: Hulu has soared from 12.5 million unique users in September 2008 to 38.7 million this past September, per comScore.
When the site launched, the decision to go free was smart. After all, the challenge was to change consumer behavior and thwart piracy.
To put things into context, in the summer of 2007, Rupert Murdoch’s News Corp. was seeking to acquire Dow Jones and there was talk of making Dow Jones’ Wall Street Journal website - the most successful paid content website in the world - go free to capture more advertising dollars.
At about the same time, Hulu was moving from an idea to beta to launch. Never was there talk of making consumer play, not because Hulu’s media owners (which included Murdoch’s News Corp.) cared about user preference, but because it was an advertising play.
The Economic Meltdown Changed the Script
With the 2008 economic meltdown came a slowdown in advertising. This slowdown affected traditional media and advertising more than online. As a result, the downward pressure on media companies’ share prices accelerated and this forced them to reconsider the free, ad-supported content model.
Incidentally, there is no more talk of converting WSJ.com into a free site, in fact, Mr. Murdoch today talks of serving less users on his web properties but charging them to access the content.
Yes, times they change.
Hulu is a great partner of ours. We really wish them well. The CPMs they command are so much higher than the industry standard that we wish that they grow as a site so we grow with them. But the story twists we read in the press should come as no surprise because media companies are impatient and desperate.
Have We Seen This Movie?
What they fail to realize, ironically, is that no matter what plan they hatch today to get users to pay, by the time these plans are implemented, the advertising market will return and they will find themselves on the inside of the pay wall looking out, once again finding themselves going against the grain.
Wow. YouTube announces 1B streams per day.
Two Three years ago this week, Google bought YouTube for $1.65B, in stock.
At the time, and today, a lot of people say the deal was a bad one and even Google’s own CEO Eric Schmidt concedes the company overpaid by $1B in order to “move quickly”.
But despite online video monetization’s slow growth, I fail to see how the YouTube deal was unwise.
1) Paper Deal
For one, it was a stock deal with Google’s share being practically at an all-time high.
2) Google owns search.
Google is now the the owner and operator of the #1 and #2 search destinations. Jack Welch used to say unless you’re #1 or #2 in a business, get out… what would he have said about being both #1 and #2?
3) Dominant in Two Main Industries
Search is king up to now, video shall be king.
Google can now brag about owning almost 75% of search queries and well over 50% of video streams online.
In our case, last year around this time, YouTube accounted for 36.9% of our total streams. Today, it’s at 49.5%:
Yes, Hulu might very well account for a large share of the total online video revenue right now (and will continue to do so), but YouTube is miles ahead in terms of audience and that is worth something.
4) YouTube now works with most of the Top 100 advertisers.
We used to see horrible ads next to our videos, today we see advertisers like BMW, T-Mobile, AT&T, US Postal Service, TRESemme, MSFT, Verizon, American Airlines, Budweiser, AIG, Absolut Vodka, Captain Morgan, Crunch Gym, etc.
The word that Google overpaid was released this week but it was something that Schmidt alluded to in the deposition from Viacom’s lawyers some time ago, but don’t be surprised if that meme comes up again from Google itself, in order to create enough of a distraction from what is surely to become a massive business for Google.
October 2009 will mark the two year anniversary of Google’s acquisition of YouTube. Before the deal even took place, I wrote that YouTube had the potential to print money. It wasn’t at the time, mainly because YouTube was growing like a weed and the company’s “meager” $11.5M in funding didn’t [somehow] allow it to build the kind of sales organization needed.
Ultimately, with soaring bandwidth and a lack of imminent monetization plan, founders Steve Chen and Chad Hurley sold their Sequoia-backed startup to Sequoia-funded Google, for $1.65B in stock. Read my conspiracy theory suggestion here.
Last year around this time, the entire US video industry was generating about 10 billion video views. Today this figure has climbed to 25 billion and YouTube alone does over 10 billion. Read comScore’s release here.
I can also attest that while YouTube has lots of upside (being kind here folks) to improve monetization, the kinds of advertisers than now advertise alongside our channel has improved exponentially, that’s right, less “Punch the Monkey” or “Press the Fart Button” and more BMW, Absolut Vodka. Of course, I send YouTube a littany of complaints and suggestions, but the fact is: it’s YouTube’s universe and we just stream it… we all need to understand that.
Ultimately, especially in light of the fact that YouTube was a stock deal, I think that Google’s $1.65B acquisition of YouTube might go down as one of the best M&A deals of all time. Maybe it’s time to update this list.
In August 2009, WatchMojo.com crossed 10,000 subscribers on our YouTube channel, where we now generate 52% of our streams. This is the first time that YouTube did more than 50% of our streams for us.
The industry norm is actually much more… but we have an amazing distribution network so historically it has been lower for us. This speaks volumes about YouTube’s dominance of the sector, however.
Anyway, all in all, another solid month for WatchMojo.com despite the so-called summer effect:
Streams in August = 4,500,000
Total since 2006 = 74,000,000
We will cross 75M streams all-time sometime in the first 10 days of September…
Worth noting that we crossed:
- 25M in April 2008,
- 33M in October 2008,
- 40M in December 2008,
- 45M in February 2009,
- 50M in April 2009 (12 months after 1st 25M streams),
- 75M in September 2009 (5 months after).
Aside from that,
- we’re on pace for 50M+ streams in 2009
- we have streamed 44M streams in the last 12 months.
- last August we did 1.7M streams, so we did well over 100% growth year over year.
No other word to describe it other than WOW.
In December 2007, I observed that there were more online videos viewed in one month than search queries (both were at about 10 billion per month). By mid-August 2008, videos were consistently pulling in more views than search queries, but now, it looks like the roof has been blown away.
Today we read that there were over 20 billion videos streamed in the month of July 2009:
US internet users watched 21.4bn videos in July, up 88% year-on-year, according to comScore. In total, more than 80% of the US internet audience watched online video, with the average viewer watching around 135 video clips a month.
That is a massive growth rate, I think my call that online video advertising will overtake search spending might prove to be true, too. Unlike search, I don’t see one company owning the lion’s share of the pie, however, even though Google’s YouTube will become a near monopoly in video content and consumption, I think the initial few years of online video suggests that it will be far more fragmented and splintered, as has been evidenced by News Corp/NBC’s Hulu taking both market share and ad dollars away from Hulu.
Back in September 2007, I emailed the CEO and CTO of Blip.tv - the company whose amazing video player we use on our WatchMojo.com property to partner with Tubemogul- the company whose amazing analytics and syndication tool we use to distribute videos.
Here’s the email:
———- Forwarded message ———-
From: Ashkan Karbasfrooshan <ash@mojosupreme.com>
Date: Sat, Sep 1, 2007 at 2:02 PM
Subject: Syndication tool suggestion
To: Justin Day, Mike HudackI noticed you guys automatically syndicate to myspace, internet archive etc., which is really smart and useful.
But, you should look into tools like Tubemogul, I think these automatically add you to 6-10 other destinations like Veoh, Revver, Metacafe, etc. Could be a good add-on.
Cheers
Ash
Eighteen months later, it’s materialized… so yes, it takes time, but this shows that Blip.tv and Tubemogul listen to the needs of their market.
The deals were signed almost twelve months ago, but the folks at Blip.tv have been working on implementation and QA… which is no surprise given how robust their platform is.
But it didn’t stop there: today Blip.tv announced a bunch of integrations with main players such as Freewheel, Roku, Verizon Fios, Sony, NBC and YouTube.
It’s these kind of deals that are cementing Freewheel, Blip.tv and Tubemogul (and of course YouTube) at the intersection of content, advertising and technology…
A couple of quotes: one from CEO Mike Hudack, “for the first time ever, talent and hard work are a greater determination of success than contacts”. Quite true. I also echo Tubemogul’s CEO Brett Wilson’s assertion that “Blip.tv is the best solution for web creators”.
This was my third time in the Blip.tv offices and as an entrepreneur, I guess the nicest compliment I can pay them is that they serve as a blueprint for many ambitious startups.
On Sunday I mentioned that YouTube was probably doing better than the naysayers suggested, and the very next day, YouTube published a post agreeing.
Earlier this year I suggested Soapbox was next to die, today MSFT confirmed that too.
Do we really need a crystal ball to imagine who is next to step under the guillotine?
Just a day after I wrote Google’s acquisition of Youtube might become one, if not the, best M&A deal of all-time, the company brass comes out and suggests that they are doing just fine, indeed.
Myth 1: YouTube is limited to short-form user-generated content. We have thousands of premium content partners, from Sony to Disney to Universal Music, and fans can find hundreds of full-length feature films and thousands of full-length TV episodes on YouTube. The world premiere of Joy Luck Club director Wayne Wang’s film, “The Princess of Nebraska,” was viewed 165,000+ times during the first 48 hours — the equivalent of landing the 15th spot on Hollywood box office charts.
Myth 2: YouTube videos are grainy and of poor quality. It was only eight months ago that we launched HD videos on YouTube, and we already have more HD videos than any other video site. Hundreds of thousands of HD videos are uploaded to the site every month, and tens of millions are viewed every day. Earlier this year, CNET’s WebWare called YouTube the best HD video service on the web.
Myth 3: Traffic, growth, and uploads are bad for YouTube’s bottom line. There’s been a lot of speculation lately about how much it costs to run YouTube. With revenue estimates ranging from $120 million to $500 million, and costs on an equally large spectrum, it seems people can pick any number to fit any theory they have about our business. The truth is that all our infrastructure is built from scratch, which means models that use standard industry pricing are too high when it comes to bandwidth and similar costs. We are at a point where growth is definitely good for our bottom line, not bad.
Myth 4: Advertisers are afraid of YouTube. Over 70% of Ad Age Top 100 marketers ran campaigns on YouTube in 2008. They’re buying our home page, Promoted Videos, overlays, and in-stream ads. Many are organizing contests that encourage the uploading of user videos to their brand channels, or running advertising exclusively on popular user partner content (see Carl’s Jr.). Advertisers just want control, so we’re continuing to develop tools and targeting products that give advertisers more control over where their ads appear on the site. We’ll announce more on that front soon.
Myth 5: YouTube is only monetizing 3-5% of the site. This oft-cited statistic is old and wrong, and continues to raise much speculation. In our view, the percentage is far less important than the total number of monetized views, and we are now helping partners generate revenue from hundreds of millions of video views in the U.S. every week (and billions worldwide), more than any other video site has total views. Monetized views have more than tripled in the past year, as we’re adding partner content very quickly and doing a better job of promoting their videos across the site.
Read the whole thing here. Anything to get the stock back to $747 I guess.
Viacom - still mired in a $1B lawsuit against Google/YouTube - believes it has cracked the online video ad code:
Want to make Web video watchers and Web video advertisers happy? Do it with a short ad at the beginning of the clip, and then another ad that pops up while the clip is running.
So says Viacom’s MTV, which reached that conclusion after testing various ad units in more than 50 million video clips it ran across its various sites. Viacom (VIA) says the intro-and-overlay package works best for advertisers’ “brand lift,” which it defines via metrics like unaided awareness, aided awareness and purchase intent.
Read more. I’ve always liked the idea of a short 5-second ad at the beginning… I can’t imagine the 30-second pre-roll disappearing but if you do the combo of a shorter ad at the beginning and then the longer ad in the middle, that does seem like a better combination. The problem is most of Viacom’s content is suitable for that 5-30 kind of format (5 second upfront, then 30 in the middle), whereas YouTube’s content… less so.
Disclaimer: YouTube is a distribution partner of ours.
Wow. So I noticed a surge in comments on our Michael Jordan UNC Profile on YouTube. Wondered why. Was he in the news? Is he talking of a comeback? Did he get caught for something? Is he running for President?
Turns out he died. Or, at least, some folks on YouTube thought that he was… Michael Jackson. Read and laugh:
PLAY
