Digital Conference

Hulu's New Guarantee: Someone Watched Your (Whole) Ad

Service Soon to Charge Only for Ads Watched in Their Entirety

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Hulu shows more video ads to consumers than any other website or service in the U.S. It will soon change the way it charges advertisers for those views, counting only completed ads as impressions for advertisers.

Jason Kilar, CEO of HULU, speaks to the crowd at the Ad Age Digital Conference Tuesday morning in New York.
Jason Kilar, CEO of HULU, speaks to the crowd at the Ad Age Digital Conference Tuesday morning in New York. Credit: Patrick Bulter

Advertisers are generally charged when a beacon is fired as an ad begins playing. But Hulu is moving that notification to the end, meaning that and ad that isn't completed won't count. "We aren't going to charge more for this," said Hulu senior VP-sales JP Colaco. "If you pay for a full impression, you will get an impression, full stop."

Hulu showed more than 1.5 billion video ads to viewers in February, compared with Google's 1.2 billion. Hulu has a huge lead over Google in total time, however -- 650 million minutes to 119 million, according to ComScore.

The services have several differences: Hulu doesn't let users skip pre-roll ads, while Google's YouTube does. And Hulu is primarily long-form TV, with more TV-like ad breaks: Viewers who opt out of the ads also opt out of the rest of the show they're watching. Hulu does offer viewers other options, such as the ability to swap out an ad or choose one of three ads at the outset of a show.

The company said its completion rate for ads is 96% -- extraordinarily high for online video, where the average completion rate is closer to 88% for long-form content and 54% for short clips, according to a study by video-ad-serving company Freewheel.

Still, the remaining 4% chafe advertisers, which pay for an impression whether or not it's viewed. "We have been negotiating for this for a while now," said John Nitti, president, activation at Zenith Media, whose accounts include General Mills. "Vendors with greater video completion rates [see] greater brand lift and greater message recall."

Though the move will cost Hulu some volume, the company's idea is that it will be made up in higher rates resulting from competition for fewer available spots. It also means advertisers get some partial impressions free, as a number of viewers will be exposed to a portion of the ad before they click away.

The change will apply across both Hulu and its subscription service Hulu Plus , which has 2 million subscribers. It will only apply to ads sold directly through Hulu, and not ads sold into the service by joint venture partners ABC, NBC and Fox.

Hulu had revenue of $420 million last year, up 60% from 2010. Its ad impressions and views are both growing at 38% so far this year, according to ComScore.

The entire online video-ad market is expected to reach $3.12 billion this year, vs. $2.02 billion in 2011, according to eMarketer.