Commentary

TV Advertisers Don't Buy Hulu, They Buy Google Keywords

by Wayne Friedman , Staff Writer, November 3, 2009

"Why license all that content to something that works that well, that seamlessly, yet without the economic model around it?"

The subject is Hulu. The opinion is from outgoing CBS Interactive chief Quincy Smith.

You can blame Smith for some stuff. (Some may finger him for pushing CBS to spend big on CNET, for example). But he brings up an interesting point about Hulu.com, a favorite choice of critics when it comes to online video.

In a story in All Things Digital.com, Smith runs through these numbers: Web video is a $700 million market. But TV, he says comes in at a $120 billion. And that's not the real problem. He says "half of those [TV ad buyers] are spending 90% of their time doing Google keywords, not buying online video." Because, as we all know, search works really well -- and yes, it's cheap.

CBS' online video philosophy has been pretty clear: Keep viewers coming back to traditional TV, that's where the advertising dollars still are -- for the near term, for the mid-term.

For the long term, CBS is unsure about where the chips may fall. But one thing is for sure. They are doing an early "all-in" in this Texas hold 'em poker-like game. CBS' philosophy seems to be, what's the rush?

That's not such a bad idea - especially when few can concretely determine exactly what business model will work for digital video in, say, 20 years.

On the other hand, CBS didn't exactly get the whole cable network thing right when the business was in the early formative years, and when things were relatively cheap. Could it be making the same miscalculation in another new growing medium?

Hulu's build-it-and-they-will-come-approach has had its critics as well. Get them in the tent now; we'll worry about how to make money later. Well, "later" is fast becoming "now." Will advertising pay? Will viewers pay?

Now put your feet up on the sofa and wait... and wait. Needham & Co. media analyst Laura Martin, speaking at the recent OMMA Video event, said it could take companies like Hulu 10 years to get it right.

6 comments about "TV Advertisers Don't Buy Hulu, They Buy Google Keywords".

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Jeff Einstein from The Brothers Einstein, November 3, 2009 at 10:54 a.m.
It may take companies like Hulu 10 years to get it right, but the odds are stacked against them, regardless of the timeline, because they're simply far too invested in the failing advertising-as-intermediary model to wake up and let go.
Fifteen years into the Internet era and we can already draw three conclusions: First, that in an on-demand media universe, nobody demands more advertising; second, that everyone with broadband access snacks on short-format videos; and finally, that no one and everyone are the exact same guys.
The only online ad model out there with the proven ability to incorporate all three of the above conclusions (in true network scale) is the Vidsense Video Snack Network. Vidsense replaces the doomed advertising-as-intermediary model with an advertising-as-destination model far more appropriate to the on-demand sensibilities of today's media consumers.
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Ron Stitt from Fox Television Stations, November 3, 2009 at 11:45 a.m.

I don't think it's really accurate to suggest that CBS is sitting on the sidelines of online video. They're actually pretty aggressive distributing video online, just not on Hulu. Reality is, sitting on the sidelines is not really a viable strategy. If the content is not available through authorized outlets, users will pirate it. The huge majority of piracy of American-produced TV shows is overseas, because they are generally not available via authorized outlets like Hulu outside the U.S.

Paula Lynn from Who Else Unlimited, November 3, 2009 at 2:10 p.m.

It's going to be an interesting battle and there will be many. I do believe major shifts will come when the older model TV's die and will be replaced with the new HDMI capability models. In addition, the hook up with the computer and TV will become EASILY wireless with a click to install. Meanwhile, none of us will starve from lack of entertainment vehicles. Even enough snacking will either fill the belly or there will be those yens for full meals to satisfy the hunger. Pioneers before the barons.

Jonathan Mirow from BroadbandVideo, Inc., November 3, 2009 at 4:57 p.m.

Again, a paid Hulu is a dead Hulu. It's popular because it's free. All I've ever seen on Hulu ad-wise is public service stuff - read: placeholders.

Matt Ellsworth from FLMSC Inc., November 3, 2009 at 8:47 p.m.

You can watch CBS online through simple programs like playon and then stream them to a tv. its pretty quick - quality is not as good as the hulu streams or netflix HD - but its available. The organization of some stuff leaves some to be desired and it is of course delayed availability.

CBS does better with their ads than hulu does - which mainly has public service ads when watching through playon as opposed to a variety of ads when watching on a browser.

Dave O'Mara from Logan Marketing Communications, November 4, 2009 at 11:22 a.m.

Very well written.