We Are Organized Chaos

May 25th, 2009

Hulu and YouTube – A Mutualistic or Parasitic Symbiotic Relationship?

Biologists define symbiosis as the relationship between two creatures who rely upon each other. The relationship is called mutualistic if both creatures benefit; if only one benefits, the relationship is called parasitic.

From Business Insider comes an article that Hulu is the 10th Most Watched Channel on YouTube. On the surface, this might be viewed as a classic mutualistic relationship. YouTube and Hulu have both benefited from something the other has to offer.

YouTube has benefited from having Hulu’s premium content on their network. Some of Hulu’s content like Family Guy, has quite a presence on YouTube with a few Family Guy clips exceeding 5 million views (at a minimum). Add in Simpson’s episodes, Saturday Night Live clips, and other NBC/Fox related content, and it’s apparent that Hulu is a vital source of premium content to YouTube. YouTube itself also seems to be getting very dependent on premium content as the other Top 10 most viewed channels on YouTube include UniversalMusicGroup (#1), SonyBMG (#2), and CBS (#8). All this is a result of YouTube failing to grow revenue off of their UGC (User-Generated Content) videos and shifting gears to feature more premium content on the site that they hope to monetize.

Hulu itself is on a meteoric rise with growth over the last year alone at 490%! Though this rise still only commands 3.9% of the overall Online Video segment, it’s clear Hulu is benefiting from increased exposure on YouTube’s network. Though Hulu’s business model has been criticized and predicted to fail, they have defied critics to become the #3 online video network on the web. Hulu also recently signed a deal with Disney which gives them even more exclusive online content cementing their status as the premium online video network.

So this is a classic Win-Win right? Well no. It definitely seems that Hulu is becoming the Parasite in this increasingly Parasitic relationship.

To start with, though YouTube is benefitting from the premium content Hulu offers, YouTube cannot run ads against this premium content. Though I don’t know if Hulu paid the minimum $200,000 required to have a brand channel on YouTube, even this cost doesn’t come close to the revenue that would be generated off of ads against Hulu’s premium content. Hopefully YouTube is charging Hulu much more than $200,000.

Adding further insult to injury, Hulu is running Hulu animated bumpers before each of their clips on YouTube. (Bumpers are short animations that run before clips signifying the creator or owner of the content.) So in essence, Hulu is promoting their own online video network on their rival’s network. This reminds me of the NFL playoffs awhile back where the upstart Fox network had just signed on the NFL and did a cross-broadcast with NBC during the Fox portion of the playoff broadcast. When it came time for NBC to reciprocate, they basically blew off Fox. I sense a similar lack of respect going on here but, ironically, Fox and NBC are now in bed together with Hulu.

Finally, making matters worse, Hulu is also running Hulu branded animated ads on the clips while they’re running – on YouTube! Sample clip below:

So how is this all relevant to Online Marketers and Advertisers? For now, not much as YouTube will continue to promote brand ‘contests’ and premium brand channels that marketers will gladly pay for. Premium brand channels are still a great way for brands to showcase their video content within the YouTube community. The Axe Effect brand channel is a great example of a premium brand channel but these are definitely not ‘free’ like normal channel sites such as Pepsi’s main brand channel.

One other area where YouTube is trying to grow revenue is by leasing out it’s real estate with home page takeovers like recent efforts for Wolverine and Sprint. But is that enough? 2008 revenue projections from YouTube would say no and even plans to try to monetize premium content might not be enough. With Hulu already owning the premium content space, it’s only a matter of time until advertisers and brands get wise to where the ‘valuable eyeballs’ are and move their dollars over to Hulu. That leaves the question – what’s YouTube to do?

IMO, YouTube is not going to win the premium content battle. Sure, they can always offer premium content on the site but that’s not what built YouTube into what it is today. YouTube was built by community members and User Generated Content. This is where Where The Hell Is Matt?, The Evolution Of Dance, and The Global Rendition of Stand By Me all reside and generated eye-popping numbers of views. This IS YouTube.

What YouTube should do is refocus efforts to the evolution in real-time web specifically as it relates to video. They’re already faced with another challenge by real-time video streaming sites like LiveStream, UStream and Justin.TV and it’s only a matter of time until advertisers figure out how to monetize these real-time videos around both professional and amateur ‘events’. Facebook and CNN showed how this can be done right with their real-time interactive coverage of Obama’s Presidential Inauguration.

YouTube should overcome most of these challenges. Efforts that embrace the community in unique ways like The YouTube Symphony, are definitely steps in the right direction. However, YouTube does need to address the Hulu issue and address it soon. At first I thought the image above captured the Hulu / YouTube relationship perfectly. However, after digging around a little more and seeing just how uneven this relationship really is, I thought the PG-13 graphic below better encapsulated how Hulu must view this entire relationship.