Changing the Advertising Model. An Interview with Hulu’s Peter Naylor

Hulu continues to keep up with the times. When it first launched 11 years ago it was 100% desktop delivered. Now, according to Peter Naylor, Hulu’s Senior Vice President of Ad Sales, the company is 6% desktop, 80% living room and 100% subscriber driven.

“It’s all about choice and control,” he explained at the recent VideoNuze conference, with three different types of subscription services depending if you want ad free or not and multi-member access. Naylor calculated that 82 million people watch Hulu per month with 70% opting for the ad supported version of the service.

Hulu’s mission is relevancy and being respectful of the viewer experience. “Our subscribers come to us for content,” he explained, and they have ample choice with an inventory of 85,000 TV episodes. Disney recently announced that they are planning to completely acquire Hulu. For Naylor this offers great opportunity for the streaming service. “Control by one owner enables us to move faster and invest more in content,” he stated, “Our international expansion will accelerate. So we will keep doing what we are doing. We have the wind in our sales.”

Ad Pod Length Consistency

Part of Hulu’s success has to be its commitment to consistency and standardization in a world of multiple choices for both the viewer and the business. In striving for consistent experiences for viewers, Naylor has had to address the inconsistencies in ad pod lengths. “There was a time when different shows had different ad pod lengths,” he explained, “but now all pods are capped at 90 seconds or less with a countdown clock. And we don’t put ads where you don’t expect them to be. We try to be thoughtful and also add as much value as possible.”

Further, “100% of our advertising is addressable and we only charge for ads that are completed.” Naylor and his team are data focused and also pay great attention to social media to discern what consumers find valuable and objectionable in their viewing experiences. “You can’t jam more ads in because you need to make a number,” he warned, because viewers have a lot more content choices.

New Types of Ad Deliveries

“The more time people view on demand, the more likely they are to have two to three services and the more time they spend online,” he noted. With multiple subscriptions, Hulu has to be very careful about ad overload and irrelevancy. “We are trying to figure out non-intrusive ad models.” To that end, Hulu created pause ads which places a static contextual ad (like a coffee advertiser) on the screen when a viewer presses the pause button. They are also rolling out a binge watching ad product in fourth quarter for those who watch three or more episodes in a row. “We will identify ‘bangers’ and feed them contextual ads such as ‘Feed Yourself.’ We make the third episode commercial-free if you watch this 90 second ad. We want to reinvent the ad model.”

For Naylor, there exists a full spectrum of ad acceptance. “It doesn’t have much to do with age income or geography,” he noted, “It has to do with your culture and interests. We strive to make ads more relevant and when you use data properly, relevance skyrockets. There will always be ad avoiders,” he added, “but they are a minority.”

When asked how much an ad’s creative factors into Hulu’s decision about where and how to place an ad, Naylor responded, “Ensuring creative is relevant to the person watching is fundamental to a viewer-first advertising experience. A relevant creative means a better experience for the viewer and better results for the advertiser.”

The Future

Naylor’s view of the future is focused on a world of connectedness and expansion, courtesy of technological innovations. “I can’t imagine a scenario where every television household in America isn’t someday connected to an IP address,” he explained. “While I don’t know what percentage of TV advertising is going to become addressable in the next two years or how long it will take us to get to a fully addressable future, I know the market is undeniably going in one direction with the help of market forces like 5G, ATSC 3.0 and the rise of on-demand, OTT viewing.”

He sees Hulu’s dominant place in the media firmament. “Today Hulu is the largest fully addressable marketplace in OTT, offering brands the opportunity to target and reach valuable audiences that are no longer found in broadcast television or via MVPDs,” he stated, “We’re offering the best of both television and digital and brands are coming to realize that OTT should be their first stop for TV in their marketing mix.”

This article first appeared in www.MediaVillage.com

GABBCON Focuses on Audience Based Buying Challenges and Opportunities

GABBCON, a relatively new conference now in its second year, held its conference in New York City last week. The event offered visionary thinking about the progression of programmatic, audience based targeting, cookies, blockchain technology, data and brand safety.  In his opening remarks, Gabe Greenberg, CEO and co-founder of GABBCON, Inc., noted that "audience based buying is at a turning point. We need to break down walled gardens and find new solutions to bring the industry together."

The ways to bring the industry together were outlined throughout the day:

It’s All About Data and How We Use It

Data continues to be one of the hottest topics but the focus of the data discussion is shifting. For some, data has become paramount, even over programming. According to Peter Naylor, SVP Sales at  hulu, “Audience is the product, not the shows. We sell audiences first. Data allows us to go beyond age and demo.”  Denise Colella, SVP Advanced Advertising Products and Strategy Advertising Sales, NBCUniversal, explained, “Data is paramount to everything we do. We have access to all types of data including Comcast STB data that allows us to help our advertisers and reach niche audiences. Data advises everything for us and we need to be able to measure it properly.” But, she continued, “there is new data all the time. It is a living and breathing thing. We are seeing more brands bringing their own data to the table – their own first party data.”

Understanding which data sets in combination are the most insightful is emerging as one of the key challenges and opportunities for marketers. Gary Reisman, CEO and Founder of LEAP Media Investments agrees: “While it’s true that data is powerful, we have almost too much data and are employing mostly tactical uses of that data.  The next generation of audience-based targeting will be focused on transforming the data sets we have into intelligence, leading to better informed strategic planning and audience creation.”

Guarantee Brand Safety

There has to be a sense of comfort among advertisers that their ads are being showcased with the right audience and with contextual brand safety. Fraud takes on many forms and is an impediment to robust advertising growth. John Montgomery, EVP of Brand Safety at GroupM, explained, “Brand safety means different things to different people. The risks that have emerged for some of our brands include fraud, privacy, viewability and ad blocking. We looked into data rights and data permissions, addressing one by one. We haven't conquered the beast but we caged it. We have done what we can.” But more is expected. “Marketers have moved trust transparency up the digital chain. It is the number one priority in the next year,” he added.

Embrace Blockchain Technology

To those who may not be familiar with the term, blockchain is the public ledger of bitcoin by which payments are executed peer-to-peer. Since blockchain essentially tracks transactions in a highly secure manner, there are those in our industry who believe that its roll-out in audience-based buying will help in tracking the consumer path with a higher level of trust and efficacy. Stacy Huggins, Co-Founder/CMO at Madhive, noted that, “the cost of trust is enormous. So blockchain is gaining a lot of adoption. The protocol secures data and lowers the cost of trust.” Jim Wilson, President at Premion, a Tegna Company, added that clients are asking for transparency - what networks were bought, who is seeing the ad. “We are trying to create standards. Blockchain creates transparency and consistency. It is efficient for publishers and advertisers.”

Put an End to Walled Gardens

Walled gardens, Montgomery noted, “are safer and there is less fraud.”  But walled gardens also create and perpetuate data delivery silos that make it more difficult to standardize and blend measurement across platforms and devices. For Howard Shimmel, Chief Research Officer at Turner, audience measurement today still has many challenges. “We still measure in silos and walled gardens create this challenge. We don't understand what drives outcome. What is it about a given exposure that drives an outcome?” he asked.  Jonathan Steuer, Chief Research Officer at Omnicom Media Group, agreed, “We need some standardization across the walled gardens. We need some building blocks of comparability - how to count a duration, what is a viewability standard.” The answer, according to Shimmel is, “Get everyone in a room together and decide on the platform we need to build. We need to get aligned to where the future will be.”

This article first appeared in www.MediaBizBloggers.com