Then a funny thing happened: Two months after Hulu launched in March, it became a top-10 video site. In August, by ComScore's measure, it served more than 122 million TV shows and short clips such as Tina Fey's impression of Sarah Palin on "Saturday Night Live." Among mainstream-media digital-video efforts, it now trails only Viacom Digital (an amalgam of hundreds of sites), Disney Online and Turner Network in ComScore rankings.
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All of this before Hulu parted with the first nickel of its planned $50 million marketing campaign this fall.
The unexpected success of the joint venture, at least initially, has caused broad rethinking within media about how to distribute TV and other video online. At the heart of the question: Do we partner with Hulu or build our own?
Given how simple Hulu has made it seem, the latter has a lot of appeal in the halls of Viacom, Time Warner and others. The notion that Hulu was able to build a brand from nothing and create a significant consumer business just by putting TV on the web has others considering their options.
"Everyone is saying, 'How do we jump on this freight train?'" said Forrester Research analyst James McQuivey.
Viacom, which had the opportunity to join the joint venture but bowed out, has studied launching its own version of Hulu in the past year. That effort has been tabled, and Viacom is set to renew a six-month trial for "The Daily Show With Jon Stewart" and "The Colbert Report," which have become top-10 shows on Hulu.
HBO, which is not ad-supported, is developing a video portal at hbo.com that will push the limit of what it can do without cannibalizing cable subscriptions. Its plan includes offering clips and some full episodes, said people briefed on the project. According to Billboard, corporate sibling Warner Bros. has attempted to revive the WB TV network as Universal Music Group is planning its own Hulu-like site for music videos, and is looking for content partners and a third-party media company to manage it.
Meanwhile, Hulu, with its spare interface designed by Avenue A/ Razorfish, has been widely imitated in its look and functionality. Hulu was the first to allow users to embed TV content on other sites; CBS and ABC, two networks not involved with Hulu, soon followed suit.
Joost, the last start-up to launch with Hulu-like buzz in 2006, has spent much of the past year retooling, creating a web-based interface to make itself a bit more like Hulu. Even while competitors envy Hulu's fast growth, they are quick to point out it isn't exactly a revolutionary concept. "Repurposing TV on the web is not the endgame," said former Disney chief Michael Eisner at an advertising event for Veoh, in which he's an investor. "It makes NBC and News Corp. feel like they're doing something; I'm not sure it's the right thing, but they're doing it well."
While it's growing at an impressive rate, Hulu still gets a fraction of YouTube's 5 billion monthly views. But then YouTube is selling advertising against only 3% of its videos, while Hulu can sell against, well, pretty much all of its videos.
Online video still amounts to just 3% of online spending, or about $345 million in the first half of 2008, according to the Interactive Advertising Bureau. But that doesn't include display ads around video, a significant business for Hulu, Veoh and even YouTube.
The Hulu model isn't without its public skeptics. Hulu links to ABC.com's content, but Albert Cheng, exec VP-digital media, Disney-ABC Television Group, sees no reason to do a formal deal with the portal. That's because 98% of ABC's traffic comes through ABC.com, not from third-party distributors such as Veoh and AOL.