Tags
advertising online, content, hulu, netflix, video online, Youtube
Although some of its most popular content remains amateur videos of extreme sport accidents, cats, or child singers, YouTube’s latest plans suggest a more professional approach. The most recent big ideas include the provision of more original, high-quality content and free online channels—as well as advertising rates more in line with its competitor Hulu.
With Tony Hawk, perhaps the best known skateboarder in the world, YouTube will produce original video clips for the site, extending its range beyond the bunch of kids showing off their tricks in the school parking lot. Other potential partnerships would include Everyday Health and its most famous employee, the trainer Jillian Michaels; Iconic Entertainment, which created the CSI franchise, and DECA, a provider that produces content for women.
Although YouTube will be investing a lot of money in this content, it plans to recoup its spending by vastly increasing its advertising revenue. For example, Hulu charges $25 to run an ad 1000 times on its site; YouTube comes nowhere close to that amount today. But currently, Hulu also offers commercialized content with much more value for viewers, and thus for advertisers, including network and cable shows. For many consumers, watching a few advertisements on Hulu is well worth the trade-off if they do not have to pay as much for their cable subscription.
There is no such incentive to watch ads on YouTube, because the user-generated content offers little value beyond simple entertainment. By supplementing this user-generated content with scripted, high production value video offerings, YouTube will extend its selection greatly, which should increase its value for consumers—and of course, for advertisers who might buy airtime from YouTube as well.
More and more consumers watch video content on their smartphones and tablets. Increasing numbers are even cancelling their regular television access through cable. But before they will do so, they must be attracted by the quality and availability of content through such alternative devices. YouTube has the opportunity to combine cable-like content with unique, user-generated content to provide the hub for video-watching consumers, before either Hulu or cable.
Discussion Questions:
- Why does Hulu have higher advertising rates?
- What are some of the opportunities and challenges to YouTube’s entry into content markets?
Amir Efrati, “YouTube Goes Professional,” The Wall Street Journal, October 4, 2011.
Grewal Levy Marketing News 
Hulu has higher advertising rates because it offers higher quality content then Youtube. Youtube is also pulled by user generated content while Hulu pushes out tv shows. Youtube will have difficulty entering this higher quality content business because Hulu is already a well established product and has already captured a significant market share most likely. Plus, users do not go to Youtube to watch higher quality content. They will need to make this content exclusive, unique, and obviously entertaining.
Another opportunity for Youtube could also be the increasing market for tablets and smart-phones, as well as the increased quality of these items. Hulu tends to take the place of a cable subscription to limit consumer spending to only an internet subscription. This acts as a replacement for someone’s TV, where they would be trading quality of viewing, for an inexpensive alternative. Youtube could play on a consumer’s willingness to downgrade their quality of viewing for a cheaper option. They could market specifically towards tablet and smartphone users that are looking for the types of content that already exist on Youtube, but for a higher quality, made for use on tablets and smart-phones. This would differentiate Youtube as still the “amateur” video source, supplemented with videos similar to those on the HSN channel that have more production to them.
I have recently noticed that Youtube is actually posting more full length movies. There were actually some well-known movies that I watched on Youtube in one singular stream which is rare due to their length. I think if they can continue to increase their posting of popular movies and TV programs, they will be able to increase their advertising rates. This will also increase traffic on their website and overall it will increase their profitability. This is one of the things I was hoping Youtube would do for a while now, and it could further revolutionize how people watch TV and movies.
I agree with Jeremy above. Youtube is user generated content, while Hulu is a platform for commercial television stations to capitalize on changing consumer preference. Don’t get me wrong, Youtube would have a chance, introducing something like Youtube premium – But why even risk the backlash from consumers? Adwords makes Google’s poster child of acquisitions look like a pot of gold. Be happy, and stick to what you are doing Youtube/Google.
Hulu has higher advertising rates because well established networks and TV shows are available on the Hulu site for free to viewers (to a point). Therefore, Hulu is able to receive higher revenue through advertising because customers are expecting to see commercials. Viewers value time and watching 5 minutes of commercials on TV is longer than watching 1 minute of commercials on Hulu. Therefore if the customer would be expecting commercials through the regular channel, then watching 4 minutes less commercials on Hulu actually seems like a good deal. For YouTube, however, customers do not expect commercials because the content is generally much shorter and somewhat amateur (unless it is an official music video or other type of video of the sort), so customers are not happy with commercials that are even fairly short in length. If YouTube wants to enter into this market with more advertising revenue, it will have to come up with a new way to increase the value of what the customers are watching. Perhaps, to compete with Hulu, YouTube could develop a relationship with companies to stream movies (with commercials) to customers so that there is more value (and Hulu does not currently do this I don’t think, so it would be an advantage).