Hulu Set for Meteoric Growth in 2011

Hulu is on pace to haul in half a billion dollars in advertising and subscription revenue in 2011, according to CEO Jason Kilar. That would represent nearly a 100 percent increase from the $263 million the company—a joint venture among NBC Universal, Disney and News Corp.—made last year.

While Hulu has plenty of doubters, both advertisers and content providers have clearly embraced the video site. During a keynote address on Monday (Feb. 28) at the Interactive Advertising Bureau’s annual meeting in La Quinta, Calif., Kilar revealed that Hulu now boasts 627 advertisers and 250 content partners.
 That represents meteoric growth from 36 months ago when the site launched with two content partners and a dozen advertisers.

Kilar did not address some of the recent controversy surrounding Hulu, including a possible shift toward a pure subscription model or a widely discussed blog post he produced a few weeks ago that seemed to take some shots at several of the company’s top TV network partners and their business models.

In that post, Kilar wrote: “Traditional TV has too many ads. Users have demonstrated that they will go to great lengths to avoid the advertising load that traditional TV places upon them. . . . The result has been many wasted impressions and an often irrelevant experience for consumers. . . . History has shown that incumbents tend to fight trends that challenge established ways and, in the process, lose focus on what matters most: customers.”

But Kilar glossed over these sentiments during his IAB speech—and went out of his way to praise his content partners.

“There is a lot of misunderstanding about our approach,” he said. “We’ve tried to look at media history and walk in a content creator’s shoes. Content companies invest a lot. They do this incredibly risky thing.”

That risky thing—producing TV shows for millions of dollars—is why TV networks load up their shows with ads. But Kilar argued that the TV business traditionally doesn’t make all of its money on advertising. According to him, the average TV show makes 41 percent of its revenue from advertising, with 28 percent of dollars coming from consumer transactions (like DVDs and selling shows through iTunes).

The other 31 percent, Kilar claims, comes from subscription revenue—a figure he seemed to be citing to justify Hulu’s recently launched Hulu Plus subscription product (Kilar did not mention syndication’s major contribution to TV’s profitability).

Regardless, Kilar’s sunny speech sidestepped the company’s murky future, as he opted to offer reasons to be enthusiastic about the online ad market’s future.

“Time spent versus ad dollars spent is incredibly out of whack,” he said, citing statistics which showed the Web accounting for 28 percent of the average person’s time but just 13 percent of U.S. ad dollars. That gap will close hastily, Kilar predicted. “That should make you salivate.”

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