Tag Archives: yahoo

Yahoo to Acquire Hulu?

The business world is abuzz with the idea that Yahoo or some other suitor has made an unsolicited bid to purchase the streaming video upstart Hulu. There are two things that have surfaced as part of this that may piece together what’s happening.

Hulu’s Revenue for 2011

The Sacramento Bee article had a quick throw-away on Hulu’s revenue to possibly justify it as a takeover candidate.

In February, CEO Jason Kilar said Hulu will have 1 million paying customers by the end of the year and generate nearly $500 million in revenue, up from $263 million in 2010. He has said the company is profitable.

First, the quick math. 1 million customers x $7.99 / month x 12 months. That’s about $100 million, out of $500 million in revenue. That leaves about $400 million in revenue for ads. There’s an axiom for the internet that says “Look at who is paying money. They’re the customer. If you’re not paying money, you’re not the customer. You’re the product.”

If a company acquires Hulu, it’s not for 1 million customers who are actually paying. It’s for their advertising base of 27 million viewers. The HuluPlus viewers are interesting, but the advertisers pay the bills.

What about Yahoo acquiring Hulu?

Yahoo has a very advanced ad platform, up there with Google and Microsoft. If Yahoo were the suitor, they’d be vertically integrating and competing against Google’s YouTube purchase. YouTube is the number one web video destination (another “free” site – so the customers are the advertisers) with Hulu being close to number three. An acquisition extends the battle for web advertising space as Yahoo makes a move into video.

I do think that an acquisition by a non-media company (Comcast being a media company example) with some deep pockets would be beneficial for Hulu. It’d have more money to invest in content, which drives their customer base and advertising opportunities. I’m cautious about a media company media acquisition since they’re very conservative and tend to protect existing markets more than grow new ones.

Since everyone involved is staying mum, we’ll have to see how it develops.

Various web reports