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Hulu Receives Good News Concerning Their Online Ad Format

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paidContent 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?

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Hulu Receives Good News Concerning Their Online Ad Format
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About Jordan McCollum
Jordan McCollum is a staff writer for the popular marketing blog Marketing Pilgrim. She has worked in search engine optimization with clients including 3M, Little Giant Ladders and ADP. After graduating from Brigham Young University, Jordan joined the SEO copywriting team at the Internet marketing firm 10x Marketing. After 10x closed its doors in December 2006, Jordan became a freelance writer and Internet marketing consultant specializing in SEO. She also has extensive experience with web analytics, conversion rate enhancement and e-mail marketing. WebProNews Writer
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