Television Reinvented & The Future of Video Advertising – Hulu’s Keynote

Television Reinvented & The Future of Video Advertising – Hulu’s Keynote

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GIGAOM’s “NewTeeVee Live” conference yesterday in San Francisco presented the theme  “Television Reinvented.” Keynote speaker Jason Kilar, Hulu’s CEO, opened his address with the slide of a bald man watching a tv commercial for a Pantene hair care product. This image set the tone for his core message—namely that key challenges the television industry faces today revolve around ways to increase advertising relevancy and effectiveness

Hulu’s Jason Kilar – The Future of Television

Kilar spoke with conviction about his notion of the future of TV; how it must allow for brand advertisers to have “more targeted, more effective conversations with prospective customers.” He posited that advertisers will be far less willing to pay for the kind of waste (that targets bald men for hair care products) they’ve paid for over the last 60 years. “What that means,” Kilar added, “is that this will be disruptive for existing brand advertising services…and in the process significant value will be created.”

Video Advertising and TV Reinvented

Kilar evangelized that any scenario for TV in the future must focus on advertising revenues. Today, we know that content owners’ ROI is based on three major revenue streams:

  1. Ad revenues represent 41 cents of every dollar generated against premium content
  2. Subscriptions represent just north of 30 cents
  3. Transaction services account for less than 30 cents.

As the leading source of premium content revenues, advertising must be even more closely examined and honed for effectiveness as we move forward. Kilar noted that back in the 50s, the “glory days of TV,” 30-minute programs generally consisted of 26 minutes of content and four minutes of ads. Today it’s 22 minutes of content and eight minutes of ads—which has led to the rise of DVR and time shifting.

Clearly the ad load is already too much. Kilar envisions a better way to do things— that says more is not better. Relevancy and effectiveness is better—for the consumer, brand advertiser, and content owner.

Kilar repeatedly stated that Hulu is laser-focused on “the pursuit of a better way” that include services to promote relevancy and ad effectiveness through better targeting approaches and technologies. He emphasized that “these services help accurately identify people that advertisers actually want to talk to, and help eliminate the people they don’t want to talk to.”

Hulu Video Ad “Secret Sauce” = Consumer Preference

Kilar voiced concern over the mounting frustration consumers are experiencing when viewing tv messages that aren’t even remotely relevant to them.

“This missed opportunity is not only bad for the consumer, but brand advertiser and content owner as well. These are the things that motivate Hulu,” he emphasized.

Hulu’s ad services allow consumers to make choices as to a preferred video ad experience:

  • Choose the Hulu ads they actually want to see, resulting in deeper engagement and higher cpms.
  • Answer a qualifier question instead of viewing a commercial (i.e. are you in the market for a car in the next six months?) The response data allows Hulu to do a better job of showing car ads to people in the market for cars.
  • Opt-in to an upfront ad, with no interruption during the show (like a theatrical marketer that runs a 3-minute movie trailer before the movie, allowing the audience to make an emotional connection with the characters and say, “that’s a movie for me.”)
  • Receive “smart tv promo spots” that recommend other shows the user may want to watch, based on Hulu’s algorithm and scrubbed data. Hulu then creates a personalized montage from the show and gives the user the option to bookmark it for future viewing or go watch it then and there. Hulu is getting a 10% response rate on this new recommendation service, which Kilar publicly introduced at the conference.
  • “Trade-out” an ad. If you don’t like an ad you can easily choose another one you actually care about, or choose from a selection of advertisers Hulu is working with at that time. Here, the traded advertiser does not get charged, while the chosen advertiser is charged a premium because the consumer has taken an “action.”

These innovative ad programs are keeping Kilar and Hulu in good spirits these days.  With “brand” and “message” recall numbers that, according to Nielsen, are 55-90% more effective on Hulu than traditional channels, Kilar concludes that “brand advertisers receive more for their money and content owners make more money…which is good for the entire ad industry.”

Hulu’s Experiences Tremendous Growth ▲120% YOY

Hulu seems to be on a mission to bring users, advertisers, and content owners under one big tent—by aspiring to create services that they all “unabashedly love.” Dr. Phil needs not be consulted here. Kilar explained how Hulu is going to do this, but, first, he spoke of Hulu’s tremendous growth over the past 36 months.

Three short years ago Hulu had no users, content streams, or revenues. It had only 2 content partners (its investors and partners NBC Universal and Fox) and ten private beta advertisers who were willing to take a flyer on its ad service.

Today, Hulu’s numbers speak volumes

  • 30 million monthly users
  • 260 million content streams (conservatively defined as an entire episode)
  • 800 million ad streams
  • 235 content partners
  • 352 ad partners in the last 90 days
  • $240 million in revenue in 2010 (estimated – vs $25M in 2008 and $108M in 2009)

Hulu seems committed to putting control in the hands of the consumer through these advertising innovations. If Kilar has his way we’ll soon see the day when higher rates will be charged by content owners for more effectively hyper-targeted ads, brand marketers will have more meaningful, engaging conversations with opted-in consumers, and the bald man Kilar illustrated in his opening will take notice of an ad for that Chevy Pick-up he’s been eyeing, instead of the Pantene ad meant for his girlfriend.

Here is Jason giving the NewTeeVee Live Keynote:

About our Guest Expert: Robert Sherry
Robert Sherry is a digital media consultant who specializes in creating business development/marketing platforms and revenue-generating products/services for online content publishers. He was formerly EVP Business Development for StudioNow and is working with to offer advertisers an incredible value and reach through sponsorship of ReelSEO. He can be reached via [email protected]


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