When it comes to online video, things are "just getting started," said Jason Kilar, CEO of the new online-video site, which has begun offering a select group a peek at a "beta test." "No one has figured out the optimal customer experience. No one has figured out the optimal targeting."
Fewer ads than TV
Hulu will pair traditional 30-second ads with long-form video, such as an airing of the NBC comedy "The Office" -- but with only 25% of the ads one might have to sit through while watching TV, said Mr. Kilar. When it comes to short-form video, Hulu will allow a 10- to 15-second video overlay, which viewers could click if they want to interact further with the advertiser.
What's more, ads associated with particular online programs will "travel" with the content if users choose to share it with friends or embed it in e-mails, blogs or social-networking sites, he said. "When we push the content out, advertising travels with it," said Mr. Kilar.
Hulu represents one effort by the nation's big media conglomerates to harness the power of online video. Sites such as YouTube have begun to usurp the place of big content providers such as NBC and News Corp., which have long depended on their own TV networks and other distribution methods to pump out comedy, drama and the like to millions of consumers. But sites such as YouTube allow consumers to post clips and network programs. The trend wreaks havoc with media companies' revenue models, because consumers have wrested the content -- and the chance to sell it to advertisers -- away from the companies that produced it in the first place. At the same time, ad dollars spent on online video are expected to soar over time. By 2011, U.S. online-video advertising will increase to $4.3 billion from $410 million in 2006, according to eMarketer.
Safer environment for advertisers
Hulu's point of differentiation is that it wants nothing to do with user-generated content. During a question-and-answer session yesterday, NBC Universal CEO Jeff Zucker suggested that advertisers were seeking a safer environment online, and might want to avoid having their ads placed alongside video with questionable or edgy content. Mr. Kilar said advertisers could see a "halo effect" from having their ads paired with "high-quality" video.
Among Hulu's offerings are old and new TV shows such as "The Office," "K Ville," and "Lou Grant" and "Hill Street Blues," as well as a smattering of feature films. Users can choose to see full-length programs or clips.
Advertisers currently on board, said Mr. Kilar, include Cisco Systems, Intel Corp., Unilever, General Motors, Nissan, Toyota and Royal Caribbean.
Hulu expects the beta to last "for a couple of months," Mr. Kilar said, so the site can be "stress-tested."