Hulu’s new advertising model: You get what you pay for.
In a bold new move, the company is altering the online-video ad market by launching a new guarantee: Advertisers pay only when their ads are viewed to completion. AdAge reports:
Advertisers are generally charged when a beacon is fired as an ad begins playing. But Hulu is moving that notification to the end, meaning that and ad that isn't completed won't count. "We aren't going to charge more for this," said Hulu senior VP-sales JP Colaco. "If you pay for a full impression, you will get an impression, full stop."
Advertisers typically see completion rates of about 54 percent for short clips and 88 percent for long-form content. Even before announcing this guarantee at the Digital Content NewFronts event in New York City, Hulu already saw a remarkably high completion rate of 96 percent. Part of this engagement can be attributed to its Ad Swap program, launched in December, which gave viewers control to choose the most relevant ads to watch. Like Hulu's new guarantee, swapped ads don't cost advertisers.
Instead of volume, Hulu is focusing on higher ad rates for fewer spots. (Before this change, an analyst estimated Hulu to charge $25 or more to display an ad 1,000 times.) Advertisers appear pleased though. "Vendors with greater video completion rates [see] greater brand lift and greater message recall," said John Nitti, president of activation at Zenith Media, an agency that works with companies such as General Mills.
Thus far into the year, Hulu's ad impressions and views have grown 38 percent. The company, which has more than 2 million subscribers, saw 31.1 million unique viewers in March, the latest available data from comScore. Collectively, they watched 1 billion videos, averaging 275.2 minutes per viewer, second only to YouTube at 424.6 minutes.
When it comes to video ads, Hulu is the tops, rolling 1.75 billion ads totaling 690 million minutes, more than any other ad property. Overall, online ads are expected to reach $3.12 billion in 2012, a dramatic jump from $2.02 billion last year. While its business model has centered around advertisements, a report from the New York Post surfacing earlier this week suggests the streaming company — a joint venture among Fox, NBCUniversal, Disney and Providence Equity, which owns Newport Television — could move toward authentication, requiring viewers to log in with pay TV credentials, to watch content. Considering how many Americans have ditched the cord in favor of Netflix and Hulu, this would be an interesting move in a rapidly evolving space.