The argument between video Web sites Hulu and YouTube has all the makings of a blockbuster movie. Upstart Hulu is competing against Goliath YouTube to attract the attention of billions of users and an increasing amount of ad dollars, against a backdrop of copyright and piracy issues.

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At stake is the fastest-growing application on the Internet: streaming video. Video traffic grew 67% between 2007 and 2009, according to a March 2010 study of inter-domain traffic by Arbor Networks. Video is the Internet's second most popular application – after Web traffic – and it represents 2.65% of all Internet traffic.

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YouTube is the Internet's dominant video site, according to an April 2010 rating by the Nielsen Co. YouTube had 97 million unique users, compared with fifth-ranked Hulu, which had 13 million unique users.

However, YouTube lags other video Web sites in the amount of time that visitors spend per visit. This is because YouTube specializes in short, user-generated video clips, while Hulu offers professionally generated content such as full-length TV shows from NBC, Fox and ABC. Hulu visitors spent 253 minutes on the site during April 2010, while YouTube visitors spent 94 minutes, Nielsen says. Competitor NetFlix beat out both YouTube and Hulu, with visitors spending 428 minutes on the site watching movies, Nielsen said.

The rivalry between YouTube and Hulu is a recent one, but it shows no signs of letting up.

YouTube is only 5 years old as of May 2010, but it has considerably more viewers than all of the U.S. TV networks combined.

Google paid $1.65 billion for YouTube in October 2006. Since then, Google has been hit by a $1 billion copyright infringement law suit from ViaCom due to pirated videos being hosted on the site.

YouTube has been a leader in deploying new technology, including high-speed, high-definition uploads in 2008 and IPv6, the next-generation Internet Protocol, in 2010. This technology is helping YouTube serve up 2 billion videos every 24 hours.

YouTube's biggest weakness is its lack of profitability, which CEO Eric Schmidt expects to change in 2010 when the service should finally be in the black.

Rival Hulu, on the other hand, became profitable last year. In April 2010, the 2-year-old site said it earned $100 million in revenue last year and would earn that much in the first half of 2010.

Some observers question whether Hulu will be able to stick with its free, ad-supported model rather than adopting a pay-per-view strategy. Hulu is lucky because of its deep-pocketed media ownership, including Fox, NBC and Disney. Hulu is available only in the United States, while localized versions of YouTube are available in 22 countries.

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This story, "YouTube vs. Hulu" was originally published by Network World .