Likely online advertising meets or exceeds the actual performance of traditional ads, but people have yet to admit out loud that the emperor has no clothes. That's only a matter of time though, and the result won't be any different than the current reality: to maintain the production levels people are used to, business models are going to have to change, whether it's subscriptions like Hulu is going for, or something else entirely.
Hulu, last I checked, reports about 370 million streams a month which lines up with Compete.com's numbers which puts them at about 7 million viewers per month (around 12 streams average per user per week).
That number puts their entire audience lower than most single TV shows (CBS manages to get at least 8 million viewers on Friday night at 10pm which is the worst time slot in existance for broadcast TV). Couple that with the fact that Online TV shows only being able to support a few commercials per show and you have a very tough market.
But as Online video reaches critical mass and the audience grows I think you'll start to see a more sustainable ad based revenue model
What we have here really is a failure of the advertising model Hulu uses. They just can't make enough money per viewer to displace traditional broadcasting or DVD sales. IMHO either Hulu or the advertisers are doing something stupid, because there really should be a gold mine there. The targeting and scheduling flexibility that's possible on a site like Hulu should make it more valuable per viewer than TV.