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Hulu Commands as Much as TV, and 10% of Online Video Ads

hulu-logopaidContent has two pieces of good news for Hulu in the past week—they’re commanding not only similar ad prices to broadcast television, but also 10% of the online video ad market.

From a Bloomberg report, paidContent shows that, for some shows, CPMs on Hulu are actually greater than they are for broadcast TV. And when I say broadcast TV, we’re talking primetime, new episode, time-slot-leading network television. (None of that cable syndicated rerun stuff!) Bloomberg’s example:

Marketers typically pay $20 to $40 per thousand viewers for a prime-time ad. On Hulu, which began offering shows to the public in March 2008, an ad on the animated series “The Simpsons” costs $60 per thousand viewers, Michael Nathanson, an analyst at Sanford C. Bernstein & Co. wrote in a June 18 report.

How can the Internet, with demonstrably fewer viewers (another example, the NCAA basketball championship game, drew 17.6M TV viewers and 7.52 Internet viewers), command such high CPMs?

A couple factors: first, that the Internet is so measurable. As CBS’s chief research officer put it:

“The reason people are paying such a high premium for these ads on the Internet is they do have a captive audience,” Poltrack said. “You know you have eyes on the screen.”

Plus, Bloomberg says, there’s an extremely scarce inventory. A typical Simpsons episode on Hulu carries only 37 seconds of advertising, versus nine minutes on television. But that also means that their overall revenues per-episode are far lower, even with more dedicated viewers. Many analysts and networks worry about television companies “cannibalizing their core business.” But maybe their core business should be shifting online.

Justifying those high CPMs, Hulu commands 10% of the online video advertising market place. Hulu is a distant third in online video viewership, after Google’s properties and Fox’s properties (including MySpace and Fox News). They have only 2.4% of the overall video market and 2.3% of the Internet’s total unique video viewers. So 10% of the online video ad market is pretty impressive.

chart-ad-supported-online-video-sites-m

Screen Digest’s report states that broadcasters direct control 44% of the ad market, while cable operators command 22%. “Other” controls 15% of the market, Hulu 10%, and portals 9%.

Let’s look at that again—Hulu is the only website singled out there. It commands 10% of the market by itself, while the rest of the categories listed are just that—entire categories of sites.

So where does YouTube fall in there? Screen Digest says:

In contrast, third party platforms such as YouTube, Joost and other portals, which have no direct vertical affiliation with major rights holders, nor direct access to premium content rights, will struggle to aggregate ad-supported movies and TV shows. The Hollywood Studios and major rights holders will continue to limit such deals, instead preferring to build their own syndicated ad-supported online video services – such as Crackle, developed by Sony Pictures, and the CBS Audience Network.

What do you think? Is the Internet, specifically Hulu, the future of television and video advertising? Will YouTube ever be able to catch up to Hulu in terms of monetization?

  • http://metalgearsolid4fan.wordpress.com Mark T.

    Hulu is great, but I don’t see why there is no support for Europe? There are a lot of people out here who would really love to use this service

    Mark T.’s last blog post..Metal Gear Solid: Rising HD Trailer

  • http://www.m-i-x.com Matt Aiken

    Hulu is still so niche it’s only the US which has less than average download capacity, look at iplayer, or Channel 4 on demand. I’ll bet that the BBC iPlayer dominates Hulu for digital streaming and downloads simply because of range of channels and content. Or are we heading for yet another digital content divide

    Matt Aiken’s last blog post..How O2 Brought On The Big Fat Fail.

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  • http://www.marketingpilgrim.com Jordan McCollum

    I guess I should clarify: as the graph says, the graph applies to the US online video ad market.

    I would comment on the BBC’s iPlayer (video, not radio) or 4oD, but since they’re only available in the UK, I can’t use them. However, I can say this: Hulu is a streaming video site. This is going to be a completely different ball game than a download video site.

  • Michelle1976

    10% is pretty significant. Online video is really taking off and we haven’t even seen the half of it yet. Sites like Adwido are emerging left and right, giving video marketers more options and more flexibility to distribute commercial video content.

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  • http://www.make-a-great-website.com Jacob Godwin

    Whether YouTube will ever match Hulu in revenue is irrelevant. They are two different models.

    YouTube is amateur video. It has it’s place in the internet world, but mostly for viral, spontaneous, low-level videos. Yes, corporations and business can take advantage of YouTube’s services, but that is secondary.

    We go to YouTube to see unknown people act stupid and maybe get 15 minutes of fame.

    We go to Hulu to watch real entertainment.

    YouTube is a cheap energy drink. Good for it’s purposes, but it won’t sustain you.

    Hulu (and any other real online TV effort) is milk and honey.