Hulu is backed by News Corp. and NBC Universal, both of which hope the site will come to function as a portal of sorts for consumers and advertisers interested in high-quality video content. Media buyers believe the ad formats that were tested -- which include translucent "overlay" ads and clickable logos that run at the bottom of a screen while a video plays -- offer insight into how TV and video commercials will develop in the months to come.
Meeting in the middle
Thanks to the proliferation of video on the web and new technological advances made to cable set-top boxes, "the TV experience is becoming increasingly more interactive, just as the interactive experience is becoming increasingly like TV," said Matt Rosenberg, group director-media and entertainment at Omnicom Group's Organic, an interactive agency. "At some point, they are going to meet in the middle."
Omnicom's OMD ad-buying firm entered into a partnership with Hulu in recent weeks, said Robert D'Asaro, OMD's U.S. director-strategic alliances. The pact means OMD will place ads from several clients, including Nissan, Best Buy and State Farm, on Hulu and be apprised of new ad opportunities that arrive, while Hulu gets access to clients and executives who oversee digital budgets, Mr. D'Asaro said.
"Hulu gives you the ability to use your broadcast advertising that has something of an emotional attachment in an actionable environment," he said. "We wholeheartedly agree that given the targeting capabilities that are starting to occur in broadcast, that being in the digital-video environment probably is a great test bed for what traditional broadcast is going to look like in the future."
OMD's agreement lasts throughout 2008; he declined to specify what it meant in terms of ad dollars committed.
Short- and long-form ads
At present, Hulu is running traditional 30-second ads in long-form video -- albeit with only 25% of the ads one might have to sit through while watching TV. When it comes to short-form video, Hulu allows a 10- to 15-second video overlay, which viewers could click if they want to interact further with the advertiser. During a beta test, which began in October, the clickable "advertising bugs" began sprouting on screen.
At launch, consumers will be able to watch commercial-free movies if they pick from a selection of movie-trailers before the show begins, said Jean-Paul Colaco, senior VP-advertising sales and operations for Hulu. The site also expects to let users choose from an array of commercials from a single advertiser in advance of a video choice -- so someone choosing to see an episode of "Chuck" might be able to pick from among three different Nissan commercials.
Because viewers choose the ads they want to see in these instances, Mr. Colaco said, they are apt to have more interest in the product being advertised and might respond to additional promotions for a particular car or movie during their video selection. A viewer choosing an ad for the Nissan Murano, for instance, might also see overlay ads for the vehicle during their chosen video and could be offered an opportunity to take a test drive at the end of their viewing.
Likewise, someone who picked a particular movie trailer might be given the chance to buy tickets for a showing of the film in theaters, Mr. Colaco said.
5 million viewers
Hulu said more than 5 million viewers have watched videos in the past 30 days on Hulu.com or its distribution network (partner sites include AOL, Comcast's Fancast.com, MSN, MySpace and Yahoo). During the beta period, more than 50,000 Hulu video players have been embedded on nearly 6,000 sites across the web. Hulu's current advertisers include Chili's, DirecTV, Intel and Unilever.
When it comes to online video, marketers could certainly use a Hulu, said Drew Corry, manager-digital extensions, at Interpublic Group of Cos.' Initiative. A lot of sites that use consumer-generated video can be grainy or even offensive, he said. Hulu is "a lot prettier," and advertisers can have a better sense of the type of content their commercials will support.
To succeed, however, Hulu will need to build up more content and keep experimenting with commercial formats, said David Cohen, U.S. director-digital communications at Interpublic's Universal McCann. Since it lacks CBS and ABC content on site, he said, it's not a complete portal for all premium video (Hulu's search function allows users to find video not featured on its site). Otherwise, he added, the site represents a place where advertisers can experiment in a new realm. "We don't know yet what is the optimal way for us to play in the video space," Mr. Cohen said.
Awareness vs. direct response
Already, there is some division over whether Hulu is a place for all kinds of advertising. Because of the high quality of the content, ads that aim to generate awareness of a particular product or service probably work better than so-called direct-response advertising, which prompt consumers to make a purchase or supply information, said Cindy Wells, manager-media solutions, at Omnicom's Tribal DDB. "If you're trying to get someone to click over and buy a vacuum cleaner or what have you, we find that does better with other environments, where you're not so much in a leisure perspective," she said.
No doubt, that's just one of the things Hulu will be scrutinizing as it moves forward. Mr. Colaco said the site has "at least 20 different commercial ideas waiting to roll out."
Hulu -- which opens to the public today -- shows everything from movies such as "Ice Age" and "The Usual Suspects" to TV shows including "The Dick Van Dyke Show" and "The Office." Not on the menu: some of the grainy, edgy material found on video-sharing sites such as Google's YouTube.
The site's success is not guaranteed. Some of its video offerings can be found elsewhere and much of its content can be passed along to blogs and other web venues. Some major suppliers of video entertainment, including CBS, Viacom and Walt Disney, are not taking part in Hulu at present.