YouTube’s Days are Numbered

I am going to make a prediction. Hulu will be the winner in web video. Not YouTube. Now, many will think I am nuts for saying this. Especially since YouTube serves over 5 billion videos a month in the USA alone. But, I believe YouTube will go the way of Netscape. A once powerful asset that commanded monopoly sized market share of the Internet that is now reduced to a bit player on the web.

I believe Hulu will ultimately overtake YouTube for the following reasons:

Advertisers prefer Hulu over YouTube – No brand advertiser wants their ads to appear next to content that is inappropriate, illegal, or just plain silly. Let’s face it. Many YouTube videos are either user generated (and we know how much advertisers hate user generated content, just ask Facebook and their challenges about making money), copyright violations, or so weird that no one wants their brand to be associated with that type of video.

While Hulu currently has a fraction of the traffic of YouTube and just launched less than a year ago, it is projected to do $70 million in revenue in 2008 in the USA. Compared to $100 million for YouTube in the USA. According to projections, Hulu will generate more revenue in the USA then YouTube in 2009. Even with just a fraction of the traffic! Why? Because advertisers trust the content on Hulu will be of high quality and shown in a fashion that will make their brand appeal to the user. Heck, when I watched Family Guy on last weekend and an ad came up that said “Family Guy Bought to you by Direct TV”, I actually said thanks to Direct TV for allowing me to watch Family Guy anytime I wanted. Any advertiser would pay through the roof for that type of brand love!

Consumers will start using Hulu more than YouTube – Every time I go to YouTube to find something, I encounter a lot of video spam (i.e. – video’s that make no sense to what you are searching for). You have to expect that on YouTube, since all the content is user generated in the first place. There is no way Google will be able to stop people from posting poor quality videos on YouTube. That’s what YouTube is about – “Broadcast yourself” – even if no one really wants to watch.

During this past Thanksgiving, I showed Hulu to my cousins back in New Jersey. They represent the normal web user. Once they saw Hulu and all the quality content they could watch on demand, they instantly loved it. They all said “this is much better then YouTube, it has real programs and movies”. Even a few days after my introduction of Hulu to them, they were still talking about it, using it, and even telling all their other friends about it. Now, that’s viral marketing. If users start making Hulu a destination site, then YouTube will be in a lot of trouble. At the end of the day, users want to see quality content such as movies, TV shows, and featured clips from movies and commercials.

Content owners prefer Hulu over YouTube – Google has taken notice of Hulu and is trying to emulate the site to some degree. Especially around getting more quality content on YouTube via partnerships with media houses and studios. However, YouTube will have a hard time convincing studios to get on board with them now that Hulu exists. Especially with the defiant attitude Google had with Studios and the issue of copyright violations when it acquired YouTube. I don’t think many studios and media giants really want to work with Google. Viacom was so mad when Google continued to show their copyrighted content on YouTube, that they filed a $1 Billion lawsuit against Google. In a conversation I had with a media executive, he told me that no one in the media and entertainment space was happy with the way Google treated them when it came to protecting copyrighted content appearing on YouTube. Because of this treatment, most studios will prefer to have their content on Hulu, which is a joint venture by NBC Universal and News Corporation. Two companies that have a vested interest in copyright protection and quality content.

Heck, some people in the media space go as far to say that Hulu could potentially help eliminate pirated movie downloads. They have a point. Why spend hours trying to download a poor copy of a movie from Bit Torrent when I could just watch a high quality version of it anytime I want on for free!

In a nutshell, if Hulu continues to be loved by advertisers, consumers, and content owners, it will become the site of choice on the web for video. YouTube will still be around. I do see a decent market for user generated video. But, the very nature of YouTube (social media, user generated content) limits how much revenue and interest it will get from advertisers. This in turn will limit its ability to get media properties to sign up with it. Why have your content on YouTube, when Hulu will pay you more for it since they generate more revenue from advertisers. If this is the case, then more consumers will go to Hulu in greater numbers for quality content as opposed to YouTube.

Hulu has built the right product and they have done a good job of making everyone in the eco-system happy. Advertisers, consumers, and content owners all get value out of Hulu. While YouTube is still king, I predict that within 18 months, Hulu will dominate video on the web.

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