Hulu CEO Talks about Its Annoying Ads

Hulu CEO Talks about Its Annoying Ads
I had a good laugh with Hulu CEO Jason Kilar about the lack of confidence others once had in his company not so long ago while speaking with him here at the NewTeeVee conference in San Francisco. The producer of this event, GigaOm, once ran a deathwatch graphic at its Website back in 2007, counting down the days to when Hulu would fold. That didn't happen. Today Hulu is estimated to be worth $2 billion. I was happy to remind Kilar that PCWorld was a true believer early on, declaring the Hulu number one on our Best Product list in 2008. He remembered.

And Hulu has been a big success. It's the best known destination for online video, and has set the standard for how online video sites should organize and deliver content. Hulu will have revenue of $240 million in 2010, up from $108 million the year before and $25 million in its first year, Kilar says.

Making Ads Bearable

One way Hulu could keep its strong growth rate is to make ads at the site less of a drag for viewers. "We believe everybody should lighten up [on ads], and we believe Hulu should lighten up," Kilar said during his keynote here. Kilar notes that old Hitchcock episodes were comprised of 28 minutes of show and 4 minutes of advertising. Today, we get about 22 minutes of show and 8 minutes of advertising.

Kilar believes Hulu-because it runs on an interactive platform (the Internet)-- is far better able to hear viewers preferences and tailor fit ads based on those. The byproduct of that, Kilar says, is that the tailored ads can be shorter.

Profiling Viewers and Targeting Ads

Here's an example. If you don't like the ad that is shown in the middle of an episode of Glee, Hulu will now give you a chance to choose another ad that's more interesting to you. If you choose an ad yourself, that ad instantly becomes more valuable to the advertiser-because the ad has been selected by you, making you a more likely candidate to buy the product.

Result: You watch a more interesting ad that's easier to sit though (and you're likely to watch longer), Hulu and its content publisher (the big networks, cable networks) partners make more money. The content publishers get anywhere from 40 to 55 percent of the revenue from an ad, Kilar says.

"Sure we want to make it a better experience for consumers, but it would be missing the whole picture if you didn't make it better for advertisers and content publishers," Kilar told me.

Hulu is trying other methods of making ads more pain-free. You can fill out a short survey in lieu of watching an ad; the survey might say something like "Mark, are you planning on buying a new or used car in the next 12 months?" If you say "yes" you can count on seeing a lot of automobile ads on Hulu.

Also, Hulu will let you watch a TV show sans commercials if you agree to watch an entire 2 minute-plus TV or movie trailer.

Making Hulu More Addictive

Making the ads more bearable could have the very desirable effect of getting people to stay at Hulu longer without getting bored or frustrated and going elsewhere-namely its chief competitor's site Netflix. But Hulu is going into content suggestion, which could an even better way of doing it.

Hulu is trying out an Amazon-type suggestion engine to help people answer the perennial question: "How do I find something to watch when I don't know what I want to watch?" As you finish watching a show on Hulu, you may see a pop-up saying "Mark, Hulu users who liked The Office also like the British comedy Peep Show." The user is then given the chance to either bookmark the suggested show, or go directly to it and start watching.

Right now, Kilar says these suggestions are getting a surprising 10 percent response rate from viewers. As Hulu learns more and more about its users and gets better at mining the data, their content selections may get more and more accurate.

Of course a Hulu without any ads at all would be nice. And Kilar says that an ad-free Hulu Plus is a possibility, but the subscriptions cost would be a lot more. Besides that, Hulu research shows that most people would rather have a lower-priced service with ads than a premium-priced ad-free version.

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