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

“Pause Advertising” and Its Implications

Pause advertising is a new form of messaging where advertising automatically runs when viewers pause content. 

According to Variety, it’s currently being tested by streaming services Hulu and AT&T. The thought is that a contextual ad, such as an ad for soda as you pause to get something to drink, might spur greater viewer attention and retention. Also, it enables the creation of new messaging inventory at a time when the trend is to reduce the length and number of ads within pods while still meeting revenue goals.

This leads to questions and implications. For one, when someone presses pause, it’s usually to leave the viewing area to do something else, like get a beverage or take a bathroom break. That potentially leaves the ad to play to an absent audience. It can also be construed as intrusive. Pause often is exactly that, a pause from viewing anything at all.

Why Pause Advertising?
But there is good reason to consider pause advertising.

This article first appeared on the Videa blog.

Hulu’s Pause Advertising That Refreshes

Hulu has embarked onto new advertising terrain with their advancement of “pause advertising” and has just announced that they have signed up two beta advertisers, Coca Cola and Charmin to test the ad effectiveness and reception. The intent is to monitor the test through 1Q19 and then roll it out in 2Q19 in select content within the Hulu streaming library.

What is Pause Advertising?

If you have never heard of it before, pause advertising is messaging that runs during the time that viewers press pause on their remote or screen. Hulu and AT&T have both been testing these types of contextual ads with the belief that they might feel more relevant to viewers. And it just may.

The philosophy behind pause advertising is that it is viewer initiated and comes at a time of transition where contextual advertising can be even more effective. So it has greater resonance to the viewer while also creating more touchpoint moments for advertisers. Pause-able moments can include a bathroom break or snack time when viewers leave the room. And in Hulu’s preview video, it can also be viewable during multi-tasking times.  I can certainly relate to that. 

Why is it Effective?

For programmers, pause advertising also increases advertising inventory in, until recently, an unexplored area of content consumption, while still providing an uncluttered viewing environment. This is welcome news at a time when viewers are pushing back on clutter through the use of fast forwarding and ad-free subscriptions while networks are trying to find ways to shorten commercial pods while still meeting revenue goals.

But pausing also mutes audio. To overcome that obstacle, Hulu is featuring static slides without any need for audio along with a background gradient that distinguishes the ad from the content scene. This has gone through considerable testing and is proving to be effective. “We know that brands are vying for consumer attention more than before and need opportunities to tell their stories in authentic and non-intrusive ways, which is why Hulu is exploring formats like the pause ad,” explained Jeremy Helfand, VP, Head of Ad Platforms, Hulu.

How is it Measured?

At this time, Hulu will be using impressions as the measurement metric for the two beta advertising clients, probably using their own internal ad tech to do so. I don’t know of any capability to measure during mute from any syndicated measurement services as of this time but hopefully, if this type of advertising takes off, syndicated measurement solutions will be developed so this type of advertising will become standard industry-wide. “We’re going to be constantly assessing and iterating on the pause ad so may add additional metrics down the road for reporting,” stated Helfand.

Conclusion

As one who accesses content online, I have become used to advertising popping up pre-roll and mid-roll and as under lays while content streams. There is something less intrusive about ads that display during muted moments because at that time I am opting out of the content temporarily anyway. I suspect that pause advertising will feel less intrusive and disruptive to viewers … as long as they are still viewing the screen and not venturing off somewhere to get a beverage. But maybe before they go, a seed will be planted as to which beverage that should be.

This article first appeared in www.MediaVillage.com