The February 7-13 issue of the Economist ran an interesting article ("Hulu who?") on Hulu's success in the online video advertising arena. It commends CEO, Jason Kilar for finding the right formula for success in the newly-emerging online video industry. YouTube may have been revolutionary in bringing online video to the masses, but it had failed to generate significant revenues due to advertisers' reluctance to associate their brands with user-generated content.
YouTube provided reassurance that consumers were indeed willing to watch videos online. This posed an opportunity to generators of professional content, if only they could come up with a model to attract both viewers and advertising revenues.
Should a service incorporate any user-generated content at all? Should a service offer content from one provider, or many? Would consumers prefer to download content (e.g. Apple) or stream it through their browsers? Would consumers be prepared to download special browser software (e.g. Joost) or prefer the browsers they already have? Which business model would win?
Enter Hulu, a joint venture formed in 2007 between NBC Universal and News Corp. To date, Hulu has been a runaway success: its user base is growing quickly (over 216m videos watched in December 2008 alone), it has over 100 advertisers, including big brands, and advertising inventory is currently sold out.
What was Hulu's formula? No user-generated content. Aggregate professional content from over multiple partners. Stream media through an existing browser. Simple. Joost has changed its business model accordingly.
Hulu has shown that it is possible to supporting streamed video with advertising, rather than charging for downloads. This is the way forward, for now.
W.Denton
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