Sometimes, You Get Lucky and Just Nail It!

I’m not the Amazing Kreskin, and I hardly consider myself a visionary prophet. I’m just Ben. But I happen to live and breathe the digital publishing business because it’s my professional passion.

So, I was quietly surprised to read this week that Hulu’s subscription video service will surpass one million subscribers in 2011.

This forecast comes from Hulu CEO Jason Kilar, and was reported in the Wall Street Journal; it was also analyzed by Peter Kafka in All Things Digital.

I was taken aback by Jason’s announcement – not because I doubted Hulu, but because I somehow managed to predict the Hulu Plus subscriber number exactly a year ago.

Indeed, a year ago, in April 2010, I said: “I expect that the service will reach or exceed a million subscribers by the end of 2011.” (See my April 23, 2010 prediction here.)

In life, like baseball, sometimes you win; sometimes you lose; and sometimes you’re rained out.

But the W’s always feel best.

Good job, Jason!

And for the record: I continue to be bullish on Hulu. As long as it can keep its content license agreements humming, it will have a killer collection of content, plus killer experience, to offer consumers; it also has killer context to offer advertisers. And that’s a formula for great success.

Media Sites – Facebook’s Beachhead in the War Against Google

Peter Kafka’s very interesting column in All Things Digital reveals that a number of media sites are seeing their referrals from Google decline while those from Facebook increase. Indeed, as a nice chart in Peter’s piece indicates, Google’s influence has diminished among 80 percent of the top media sites in the last year.

This isn’t surprising, and it makes perfect sense to me.

Using martial metaphors (how apt and appropriate these days!), media is the beachhead for Facebook’s entry into all Web browsing and all matching between visitors and what’s visited – and Facebook is quickly taking over that territory from Google.

Think about it.

Media is where it all starts, but certainly not where it ends.

Media sites are the most reactive to serendipity on the Web. And they’re  the most “frictionless” of any product we consume online or off:  The only cost is the click of a finger and a few seconds of load time. It doesn’t cost money to read a link; you don’t have to enter any shipping or billing information; you don’t have wait time while a freight company delivers it; and you don’t need a sharp implement to open it – or a place to put it.

The most viral media consumption is emotionally driven, too. And it  generally offers high entertainment value, and is associated with some urgency because people want to be “in the know” in order to earn social currency. And, finally, like many products, it’s taste-based.

All of this helps explain why Facebook is gaining influence among media sites. And why, whenever Facebook offers a link to a media site that is worthy of consumption, there’s a very high probability that it will, in fact, be consumed.

Commerce sites are the next frontier for Facebook. As I mentioned above, commerce is harder, because there’s more friction, and there are more impediments that get in the way of buying / consuming.

But these are just degrees of friction.

As Facebook gets better at knowing me, who I share taste with, what products I need, and what people like – both people in general and people I’m likely to share taste with – it will be able to overcome that friction.

And, one can easily imagine Facebook doing everything it can to grease the commerce skids by facilitating frictionless login (Facebook Open Graph and Instant Personalization), payment (Facebook Credits), and more to reduce the underlying friction, so that commerce sites will follow closely behind media sites and start leaving the Google orbit.

Google is still driving traffic to many Web sites. But that is clearly changing. And Facebook’s assault is starting to succeed.

Hulu Plus Will Be Worth $100 Million in Revenue in 2011

Hulu Plus SubscriptionRecently I’ve written about why I think the Hulu Plus subscription model will be successful.  Yesterday, Peter Kafka (@pkafka) wrote in AllThingsD that Hulu’s price point is both too high for consumers and too low to satisfy media companies.  I respectfully disagree.

My prediction is that Hulu Plus will be driving more than $100 million in incremental revenue for the company in 2011.   If Hulu grows modestly from its current 19.5 million monthly uniques in the U.S. according to comScore*, and they’re able to convert a small fraction of that audience at $9.95, the numbers are compelling even accounting for the likely double-digit monthly churn.   I expect that the service will reach or exceed a million subscribers by the end of 2011.   Meanwhile, 30% margin or $30+ million would be welcome for a company that only recently announced profitability, particularly if they’re able to avoid traffic cannibalization on their existing free, ad-sponsored streams.

Granted, most media companies are making more on their own sites, but this is largely upside to their existing online revenue.  Meanwhile, a paid model preserves the “premium” value of the majority of their catalog.

Beyond the financial benefit, offering a paid subscription also provides several strategic benefits to Hulu:

  • Gives them a path to move off the desktop and onto mobile and the TV.   The media companies are adamant that consumers not be trained that video content is “free” on mobile as they’ve become accustomed to online.
  • Opens up the service to new content providers including cable, and a much larger catalog of content from their existing partners

Is $9.95 monthly too much for consumers to pay?  When your content is exclusive, and more importantly, the experience is this compelling, I think a small but meaningful segment of customers will open up their wallets.   Of course, that is assuming that Hulu’s subscription offer and experience demonstrate the same outstanding execution as their free service (and marketing) to date.  Many services have failed at charging for video online, but Hulu is in a unique position to finally succeed.

* Footnote: Interestingly this is substantially less than the 43 million uniques announced by Hulu CEO Jason Kilar back in December, perhaps due to the comScore hybrid measurement debacle; I’m using the lower numbers to be conservative