Hulu vs. YouTube: What's Conjecture, What's Reality?

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Includes: GE, GOOG, NWS, SNE
by: TMT Analyst

With all the talk about Hulu edging towards Google (NASDAQ:GOOG), I decided to take a look at the traffic stats, courtesy of Compete, to determine what's conjecture and what's reality.

In my analysis of the unique visitor data, I went back two years on a monthly basis. Instead of comparing growth rates, which are in the high tripple digits for Hulu, I decided to look at Hulu's (and Crackle) YouTube penetration, meaning Hulu's traffic divided into YouTube's traffic.

In August 2007, Hulu's traffic was 0.1% of YouTube's traffic. By April 2009, Hulu's YouTube penetration grew to 8.9%, a meaningful and envious jump in two years. [All domestic data.]

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In April 2009, Hulu's unique visitor traffic grew 630% YoY compared to YouTube's 25% YoY growth rate. I decided to extrapolate the growth rates for as long as I could. My analysis showed that in three years, Hulu will reach about 30% of YouTube's traffic in three years, and will likely stall at those levels.

Thirty percent will be an enormous traffic level given that YouTube owns the user generated content eyeballs while Hulu is only professional content. Yet still, YouTube should feel safe from a competitive position. Now all they have to do is figure out how to make money.

My bet is that Hulu's owners spin it out into a public company in about two years.

Hulu: Founded in March 2007, Hulu is co-owned by NBC Universal (NYSE:GE), News Corp. (NASDAQ:NWS) and Providence Equity Partners. It is operated independently by a dedicated management team with offices in Los Angeles, New York, Chicago and Beijing.

Crackle, Inc., a Sony Pictures Entertainment Company (NYSE:SNE), is a multi-platform next-generation video entertainment network that distributes digital content, including original short form series and full-length traditional programming from Sony Pictures’ vast library of television series and feature films. Crackle is one of the fastest growing entertainment destinations on the Internet today, offering audiences quality programming in a variety of genres, including comedy, action, sci-fi, horror, music and reality. Crackle reaches a global audience through its impressive online and mobile distribution network.