Digital A-List 2009

Top-Notch Content Makes Hulu a Success

Range of Available Shows, Ease of Use Key to NBC and Fox's Surprise Online Juggernaut

By Published on .

Illustration: Pete McDonnell

NEW YORK (AdAge.com) -- Old media railed for years that content was king, only to have its online-video traffic numbers usurped by lip-synching college kids and dramatic prairie dogs. Simply put, the traditional networks, with all their desirable, high-quality video programming, hadn't figured out how to turn into bona fide online juggernauts -- until Hulu.

The joint venture from News Corp. and NBC Universal allows users to access episodes of programs ranging from "Friday Night Lights" to "Bewitched" to "In Living Color." Between April 2008 and February 2009, Hulu has gone from not being ranked in terms of video streams by ComScore VideoMetrix or Nielsen VideoCensus to holding the No. 4 and No. 2 spots, respectively.

"At its core, the quality of the content is clearly top-of-the-heap," said David Cohen, exec VP-U.S. director of digital communications at Interpublic Group's Universal McCann. What's more, he added, "the user experience is also top-of-the-game. It's clear they did some significant user testing" when designing the site.

Hulu may increasingly have to rely on that user experience; at some point, its exclusive access to certain programming will run out. And then its ability to create the most enjoyable, annoyance-free experience on the web will be paramount.

Hulu Senior VP-Advertising J.P. Colaco recalled early discussions back in July 2007, nearly a year before the consumer launch. Hulu execs gathered for a meeting to think "about what we wanted people to say about us when we weren't in the room."

Favoring content
With the mission concocted during those meetings in place, Hulu executives scrutinized everything from the background colors on the site to the frozen scenes used to attract viewers to a particular episode or clip. The idea was to create what Mr. Colaco calls "a clean, clutter-free, non-intrusive environment" that allows for a balance between content and advertising tipped in favor of the content.

At the time, the wags were thinking "clown co" -- the networks would find a way to fail again in online video. Perhaps no venture to come out of an existing media giant had been able to nail it, but Hulu has, and it shows in its traffic growth.

The February ComScore VideoMetrix report shows that Hulu streamed more than 332.5 million videos, nearly tripling the 88.2 million video streams ComScore reported in May 2008, when it began to track the service. The same report shows Hulu has more than quintupled its number of unique viewers to more than 34.7 million in January 2009 from 6.7 million in May 2008.

From an audience standpoint, the site's still no YouTube, but some suggest it's beating the Google-owned site in revenue, proving that eyeballs aren't everything, and sellers need to create something compelling for marketers as well as users if they want to make money. (And the high-end-online-video market is expected to be a relative bright spot in a down economy.)

While Hulu provides a TV-like experience, it has gone its own way when contemplating how to support its content with ads. It's one of Hulu's most important distinctions and a reason major media agencies and brands are leaning on it to help come up with the formula for scalable video in a digital world.

Viewer control
Rather than interrupting programs with two to four minutes' worth of ads and network promos, as traditional TV does, Hulu has come up with something a little different. The site originally paired traditional 30-second ads with long-form video, such as an airing of the NBC comedy "The Office" -- but with only a quarter of the ads one might have to sit through while watching TV. In short-form video clips, Hulu has allowed 10- to 15-second video overlays viewers can click if they want to interact further with the advertiser.

WORK
Family Guy in Hulu

'Family Guy' is just one of the many new, old, long-form oddball programs offered by Hulu.

Only one marketer gets to pitch users during a program or, in some cases, only before the show starts. Sometimes viewers can watch commercial-free movies if they pick from a selection of ads before the show begins; sometimes they can opt to watch two minutes of ads before an episode of a favorite program, so they can watch the content without interruption.

"We had a belief that we could build an advertising experience that complements the viewing experience instead of taking away from it," said Mr. Colaco. Hulu has secured relationships with more than 180 advertisers, up from 30 at launch.

The online-video field is a crowded one, and Hulu has competitors from YouTube to rival Veoh to ABC.com. Recently Hulu has scrapped with TV.com, which is owned by NBC and News Corp. rival CBS, over whether the site can run Hulu content. Hulu has also pulled its content from streaming on Boxee, another video application, citing the needs of its content providers. Analysts take the move as evidence that content companies may want to narrow online distribution of their content.

The next year should be a heady one for Hulu. "There is no shortage of competitors in the space. They are far from done," said Steve Kerho, VP-analytics, media and marketing optimization at Omnicom Group digital-ad specialist Organic. "If they are agile and they keep pushing the envelope and keep up with technology, they've got a good shot."

MOST IMPORTANT DIGITAL LESSON I'VE LEARNED

Jean Paul Colaco
Users like to select their own ad experiences.

Hulu lets users choose one of three ads; it also lets users choose whether they'd prefer to watch a two-and-a-half-minute-long branded-entertainment segment in lieu of normal commercial breaks. "Two-thirds of people opt in to select their own experience, with nearly 90% view-through," said J.P. Colaco, senior VP-advertising. "We've learned through our user feedback that people have little patience for poor ad experiences such as repetition of ads and weak creative."

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