According to a recent BI Intelligence report, online video ad revenue in the US is expected to grow from $2.8 billion in 2013 to $5 billion by the year 2016. Over the same period, the report estimates, TV advertising will decline 3% annually from $74.1 billion to $68.1 billion. Last December, video ad views doubled to over 35 billion views.
Players like Hulu will gain from this increase as they earn a bulk of their revenues from digital advertising. After Hulu’s IPO plans failed to materialize, they have kept their financials confidential. Last year, Hulu had crossed $1 billion in revenues. More recent reports reveal that as of April this year, the company had over 6 million users paying the monthly $7.99 fee for access to Hulu Premium. That number is still very modest compared with Netflix’s recently reported 50.7 million users who pay the same amount for their subscriptions.
But Hulu makes significant money through advertising. In fact, analysts estimate that advertising accounts for 59% of their revenues especially since even Hulu Premium’s users have to watch ads.
Hulu’s Advertising Growth
According to comScore, as of December 2013, Hulu showed their users an average of 82.3 ads a month, compared with YouTube’s average of 32.3 ads. To improve the efficiency of their advertising, they are implementing new formats. The biggest one being 360 ad, which is an interactive ad platform. Using 360 ad, brands like Pizza Hut are able to offer in-stream purchases that let users order pizza without stepping out of the Hulu environment.
Hulu’s Content Growth
Meanwhile, Hulu continues to invest in content. During the current year, Hulu plans to triple their content marketing spend on original programming. They are already working on second seasons for Deadbeat, The Awesomes, Quick Draw, and East Los High. Unfortunately though, unlike Netflix, Hulu’s shows have not really hit the Emmy Award winning caliber. They are hoping to change that and recently tied up with Oscar nominated director Jason Reitman to direct a ten-episode series CASUAL for Hulu Original.
In October this year, Hulu extended their partnership with Viacom to expand the titles available on their network. Hulu will now stream top titles from Nickelodeon to Hulu Kids including titles such as Invader Zim, The Ren & Stimpy Show, Drake & Josh, and Hey Arnold!. They will also add past seasons from old shows including full seasons of Key & Peele, Drunk History, Ridiculousness, Tosh.0, Kroll Show, and Inside Amy Schumer.
Hulu is also reaching out to the Latino population and the tie-up with Viacom will let them stream Nickelodeon titles such as SpongeBob SquarePants and Teenage Mutant Ninja Turtles in Spanish.