BUSINESS BLOGS
BUSINESS BLOGS
category: business
08 Mar 2008

SAI speculates about Hulu’s impending launch.  Considering the company’s pedigree, corporate backing, deep funding, people’s expertise and content programming, it’s not surprising to see Fortune be so bullish about its launch, “whenever that might be”.

Paid Content this morning pointed to a report by Bear Stearns, projecting YouTube’s revenue:

Bear Stearns estimates that YouTube earned $31 million in 2007 and will get $90 million in 2008; it expects revenues to grow to $277 million by 2012, with the primary driver of the growth being the banner ads. On a breakdown for 2012, it expects $165 million from premium/prime inventory (banners etc), $6 million from remnant, and $21 million from video/streaming ads.

We know it earned $15M in all of 2006, the year Google acquired it.  What’s correct about BS’ report is that the perception that all video ads will come from pre, post or mid-rolls is plain false.  A lot of the inventory that is actually sold on video sites stem from display/banner ads.  Before Google bought it, I pegged YouTube’s potential revenue at $15M per month… but YouTube was more concerned with staying up and running, than monetizing its inventory.

Of course, YouTube’s challenge is trying to secure rights to the content on the site and create more sellable areas for advertisers.  Considering that a mere 36 months the site didn’t exist, that is akin to changing a jet engine at 30,000 feet.

In Google’s hands, YouTube is looking for a revenue model that works without alienating users.  But as the biggest site in the segment in the hands of the strongest web company, YouTube’s revenues will grow over time, no doubt.

But expecting YouTube to unleash pre-rolls might lead onlookers to the dead-ends. While I fully expect video ads to soar even above the expected $7.1B Forrester is pegging the segment to yield by 2012, I think the line between what is display/banner and what is video per se will be very hard to differentiate.

Anyway, dicing this up, as percentage of all video ads, you get (we’ll simply double the US video market ad size to get global size):

- 2006: $15M / $800M = 1.875%

- 2007: $31M / $1.5B = 2.06%

- 2008: $90M / $3B = 3%

- 2009: $277M / $15B = 5.54%

Clearly, YouTube is going to get more and more share of the online video pie, but as you can see, even though YouTube commands 50% market share with 33% of all streams (as of December 2007, anyway), it won’t see a proportional share of revenues.  We at WatchMojo.com will certainly play our part to help YouTube get as much as it can, by virtue of being a content provider (and as of yesterday, at least, ranked 50th largest - check it out here).

Mind you, we’re somewhat agnostic to any one distribution point, as we are also quite proud to power MySpace TV, too.  On News Corp.’s massively large social networking site, our channels include:

Auto | Business & Tech | Comedy | Fashion | Lifestyle | Sports | Travel | Video Games

All to say, as Hulu inches closer and closer to launch, all eyes will turn to it. Oh, did we notice that WatchMojo.com’s also partnered with Hulu, too?

I won’t comment on the site’s launch - frankly, I don’t have a clue, though if I did, I probably would not say much since it’s not my place - but we certainly look forward to helping Hulu out too, in any shape, form or fashion that we can.  The day we joined their deck was a proud day for us…

There are hundreds of challengers in the video aggregation/distribution space, not all of them will survive or succeed, but so far, I echo a lot of the things in the Fortune piece: I am impressed with Hulu from top to bottom.  But then again, I am a content guy and even if the site’s bells and whistles wasn’t as impressive as it is, I’d feel the same way… but it is true that the folks there have put a lot of thought and pulled off a great user experience: NBC and News Corp. must be proud… and the companies that have signed on as distributors will be as well.  As a content producer, I am honored that our content will stand shoulder to shoulder with TV programming.

While all of these great sites are creating amazing distribution opportunities, there’s never been a better time to be in the content creation and production space… 2008 is the year that the tide begins to turn (away from the UGC mindset) and by 2012: it shall be king.