YouTube's much smaller rival Hulu is expected to pull even with its rival in terms of advertising revenue next year, which analysts say could pronounce Google Inc.'s purchase of the video website two years ago as a mistake.
Hulu, which is backed by News Corp. and NBC Universal, is expected to earn about $70 million US in U.S. advertising this year, compared with YouTube's $100 million US, according to Arash Amel, an analyst at media research firm Screen Digest. Both websites are expected to pull in about $180 million US next year.
YouTube earns about half its advertising revenue in the United States and the rest internationally. Hulu, however, has not yet expanded into international markets.
YouTube is considerably larger than its rival, drawing 83 million unique U.S. viewers in September. Hulu pulled in six million viewers in the same time frame, according to ratings tracker Nielsen.
Google paid $1.65 billion US for YouTube in 2006. The site was already massively popular but featured mainly user-generated content or pirated video, neither of which is useful in drawing advertising dollars, Amel said.
"YouTube is in a very tough place right now," he told the Financial Times. "Most of that user-generated content is worthless or illegal. The next 18 months will determine whether or not it was just an expensive mistake for Google."
YouTube has over the past few months signed deals with television networks, including CBS and TVO in Canada. The website is also in talks to offer feature-length films. Much of its content is still made up of short, amateur-produced clips.
Hulu main content consists of network-produced shows, such as NBC's The Office and Fox's The Simpsons.