Hulu: A Better Experience for Viewers, a Better Home for Advertisers

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This appears in the Official Guide of Advertising Week New York 2019.

Hulu’s head of advertising sales reveals why the streaming platform will continue to offer ad-supported as well as commercial-free choices to its viewers.

Hulu’s approach is “viewer first, viewer first, viewer first,” says Peter Naylor, Hulu’s head of advertising sales, who is based in New York. Core to that choice is delivering both ad-supported and commercial-free services through its streaming TV platform, he says.

“At Hulu, we’ve given our viewers a choice of how they want to engage with the platform.” Hulu is the only streaming service in the US to offer viewers the choice between an ad-supported or a commercial-free television experience and the option of adding on Live TV.

With viewers TV consumption largely shifting to on-demand streaming services, the majority of which are ad-free, there’s a widely held assumption that ad-supported television is dead. Hulu is proving that assumption wrong. Given the choice, the majority of Hulu viewers are opting for the ad-supported service.

“Just because a viewer has opted-in for ads, it doesn’t mean we can take advantage of it,” says Naylor. “We know our viewer is literally one click away from going to a commercial-free experience, so that keeps us on our toes. You have to get the ad experience right.”

Take a break: why less is more

Part of getting the advertising experience right means having a “light” commercial load. “It means having a limited number of ads and being respectful with things like the number of times that they [viewers] see the same ad.” Earlier this year Hulu committed to capping ad breaks at 90-seconds and investing in frequency management to limit the number of times a viewer sees the same ad in a day, and even in a week so that viewers aren’t over-exposed to a brand which is a common complaint in the streaming space.

According to Naylor, it also means “embracing new non-intrusive and non-traditional formats.” One example of innovation is the so-called “pause” ad Hulu is testing with beta partners Coca-Cola® and Procter & Gamble. “When people pause the action for whatever reason we show them an ad that is situationally-relevant. In the case of Coca-Cola imagine you pause a show and a piece of creative comes up that says ‘For a pause that refreshes, Coca-Cola.’ The creative matches the experience,” says Naylor. For Procter & Gamble, the brand being advertised is Charmin®, and when you hit pause it says, ‘Need a Break? Enjoy the Go!’ with the Charmin bear.

Relevancy is key for Hulu

Relevancy is vital to getting the ad experience right, says Naylor. “People don’t hate ads. They hate irrelevance. If they can find relevant ads that are entertaining and informative then it’s a really reasonable part of the television experience.”

“People don’t hate ads. They hate irrelevance.”

To ensure ads are relevant, Hulu takes a personalized, data-driven approach. “The nice thing about connected TV is that 100% of the viewing happens through an Internet Protocol [IP] address. So, everything marketers are comfortable doing within a browser space when it comes to targeting and using data they can think about in the television space with Hulu,” he says. “When it comes to relevancy, we obviously are happy to do good old-fashioned age, demographic and geographic targeting, but more interestingly we can use our first-party data [and] our advertisers’ data to make sure they are reaching the right person at the right time with the right message.”

“That’s another reason advertising will continue to have a home at Hulu, because when people choose the ad-supported offering not only are we serving them up a very modest and restrained ad load but we’re doing everything we can to make sure that the ads that they receive are relevant to them. Relevancy is an essential part of a viewer-first ad experience.”

“Control has shifted from the media owner to the viewer.”

Advertising: Hulu’s secret weapon helping to fund world-class content

Ad-supported television is at a critical juncture. “Control has shifted from the media owner to the viewer and as more people ditch expensive cable packages for OTT TV, it’s never been a more important time for streaming services to invest in ad-supported offering,” says Naylor. For Hulu, an ad-supported offering means a revenue stream that doesn’t exist for most of its competitors. “At Hulu, we are enjoying a dual revenue stream, which means we can invest in world-class technology and world-class content to keep viewers coming back for more,” says Naylor.

Hulu’s track record in delivering world-class content is impressive. “Content is going to be a differentiator for everyone in the space. We’ve shown that we have the ability to create some of the best content of the world as evidenced by the fact that we were the first streaming service to win an Emmy Award for best drama.”

That prize went to the Hulu Original, The Handmaid’s Tale; one of Hulu’s best-known shows. Season three of the Emmy-winning drama saw 40% more viewers than in season two. “It’s a wonderful time to be a TV lover because there’s so much choice,” says Naylor.

Alongside The Handmaid’s Tale, Hulu works with J.J. Abrams and Stephen King on Castle Rock, and is also working on upcoming series with Reese Witherspoon and Kerry Washington on a limited TV series adaptation of Celeste Ng’s bestselling novel, Little Fires Everywhere, and developing The Dropout based on the ABC News investigative podcast starring Kate McKinnon. “It’s just one A-list creator and or actor after another,” says Naylor.

As the trend towards cord-cutting continues, according to Hulu’s Naylor, “TV is healthy and doing just fine. It’s just a different form of TV. You see the big pay-TV bundles declining. And you see services like Hulu rising [because] it’s a better way of watching TV. Imagine you’re a young adult getting your first apartment or your first home. You’re not going to get a landline because your cell phone is your phone. And you’re probably not going to sign up for a big pay-TV package when all you need is a Wi-Fi signal and you can get everything on-demand from services like Hulu.”

With others embracing the OTT revolution Hulu will need to innovate to survive. “Competition breeds innovation and we’re going to continue to innovate with the viewer top of mind. From our content offering to our product and advertising experiences, every decision we make across our entire business starts with the viewer.”

With over ten years in the industry and Walt Disney behind it, Hulu is here to stay. “We’ve got an amazing running start. We know how to market in a direct consumer fashion while some of our competitors are learning for the first time what it takes to be in this business,” explains Naylor. “We’re perfectly positioned to continue to leverage the bigger consumer trends of viewers watching TV in a new way. It’s viewer first, viewer first, viewer first. Because we realize that the viewer is completely in charge of their TV viewing experience. And if you give them the control and choice, we know they will choose Hulu.”

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