• by Mark Walsh  @markfwal, June 11, 2010

When it launched with much fanfare last December, Vevo was billed as the Hulu for music videos -- the major music labels' answer to the premium video hub by NBC Universal, Fox Entertainment and ABC Inc.

Seven months later, Vevo has surpassed Hulu's audience and similarly attracted dozens of blue-chip brands with a lineup of star-laden, professionally produced videos. Unlike Hulu, Vevo -- the joint venture of Universal Music Group and Sony Music Entertainment and Abu Dhabi Media Co. -- has used its partnership with YouTube as a booster rocket to build traffic quickly.

Vevo in April drew 43.6 million U.S. unique viewers, equal to a quarter of the total U.S. video audience and making it the fourth-biggest video property behind Google, Yahoo and MySpace. Hulu was No. 8, with 38.7 million.

But of Vevo's audience, only about 10% -- or 4.3 million -- comes from Vevo.com, with the balance coming mostly from the Vevo's YouTube channel. Hulu's 958 million video views in April were also about three times the number on Vevo. Even so, the music industry-owned property appears to be living up to the hype after a launch marred by technical glitches.

In a recent interview, David Kohl, head of sales and customer operations for Vevo, acknowledged that the initiative has exceeded its expectations to date. Not only has it outpaced Hulu in traffic, but also more direct online competitors like MySpace Music, MTV and Yahoo Music. Pulling in the targeted 18-to-34 demo is a steady diet of high-def videos from marquee names including Lady Gaga, Beyonce, Ciara and Ludacris.

The premiere of Lady Gaga's "Telephone" video with Beyonce helped generate a 50% traffic spike in March to nearly 7 million visitors.

More important are the top-tier advertising brands Vevo is attracting, including AT&T, MasterCard, McDonald's and Ford. Kohl says the initial group of a dozen sponsors has grown to 75, with annual commitments by some of up to $10 million. "Advertisers like that MTV isn't the only place to advertise," said Kohl, suggesting that Vevo gives marketers more bargaining power in the segment.

While he would not discuss specific rates, Kohl said pricing is "competitive with the marketplace," which would put Vevo CPMs roughly in the $20 to $25 range. Chris Allen, director of Video Innovation, Starcom USA, said he has not done business yet with Vevo on behalf of clients, but is giving it serious consideration.

"It's starting to get traction with consumers," said Allen. "It's a good move on the part of the record labels to work together to create a business model that creates scale to attract ad dollars." He added that creating a Vevo channel on YouTube was especially shrewd because it benefits from the video giant's firehose of traffic while shielding brands from the risks of advertising against user-generated content.

Kohl emphasizes that Vevo's content is more than just 3-minute music videos. It has also introduced a handful of original Web series and broadcast live events. The latest -- "Charging Up the Music," sponsored by Colgate-Palmolive -- spotlights an upcoming new artist each week. The first "video featurettes" focused on singer-songwriter and guitarist Orianthi, rock/pop band Neon Trees, and singer Debi Nova.

On Thursday, Vevo exclusively streamed the FIFA World Cup "Kick-Off Celebration Concert" from Soweto/Johannesburg, featuring Alicia Keys, Black Eyed Peas, John Legend, Juanes and Shakira, among others.

And underscoring its clout in bringing together music acts and advertising, Vevo has arranged a live performance and meet-and-greet on Wednesday by Third Eye Blind for staff at Universal McCann and WPP's Team Detroit.

In addition to expanding original content, Vevo also plans to broaden its distribution across the Web beyond its own site, YouTube and partners CBS and AOL. Talks for syndication deals with other major sites are underway and should be finalized soon, according to Kohl.

Vevo, which counts EMI is a content partner but not part owner, is also in talks with the lone major label holdout -- Warner Music Group -- to join its ranks. But if Warner does come around, Vevo could be an even more formidable force in online video.