Hulu plans to start producing content with advertisers again. But instead of developing branded shows as it used to do, the online video service will be producing actual ads.
Hulu has come up with a new product for advertisers called Custom Integrated Commercials, in which a brand and Hulu would collaborate on a co-branded video ad to run on Hulu. The company plans to present the idea to attendees at its NewFront presentation on Wednesday in New York.
"As a leader of sales, I tend to go where the money is. The big trend we're capitalizing on is this desire the market has for branded content," said Hulu's senior VP-advertising sales Peter Naylor.
Hulu hasn't signed any deals yet to produce one of these ads with a brand, but will show NewFront attendees a mock-up of what these ads would look like. Like a typical co-branded campaign, Custom Integrated Commercials will feature both the advertiser's and Hulu's brands.
The idea is to create "story-esque commercials" that capitalize on Hulu's relationship with its audience, Mr. Naylor said. He described the inclusion of Hulu's brand as "a wink to the audience because they know we're doing this with our partners and the personality really comes through."
Some eyebrows may raise at Hulu touting its ability to create content for brands after the company pulled back on that work late last year. Mr. Naylor addressed that potential skepticism. Hulu "exited the business of creating long-form shows [specifically for advertisers] because of the challenge of attracting viewers to it. This execution fits our model by making it in the commercial break," he said.
The custom integrated commercials will be sold as an overall package, in which a brand and Hulu would effectively share the costs of making the ad and the brand would pay to run the ad on Hulu in the same way the brand would run a traditional ad on Hulu.
"Most of our customers have media budgets. So when we go to them, we say, 'Look, the production will be more or less a cost, and we get creative to make sure that their media budgets can cover the creation and obviously the media time that goes with it," Mr. Naylor said.
How much one of these campaigns would cost is "fluid," he said, because of variables like production costs. Aside from creative costs, advertisers would only be charged for ads on Hulu that are viewed to completion.
Since the ads are created to run on Hulu, they have some flexibility when it comes to length. "We're not a slave to any programming grid," Mr. Naylor said. Usually TV advertisers must adhere to 15-, 30- and 60-second blocks, but they "don't have to adhere to the clock" when it comes to these co-branded spots, Mr. Naylor said, noting as an example that an ad could last 39 seconds if that's how long it needs to be. However if an advertiser wants to syndicate the ad outside of Hulu, they may need to stick to standard lengths.
While made to run on Hulu, these co-branded campaigns could make their way to other online video services like YouTube or Facebook. "We would license [the ad] to [the respective brand] if they want to use it on their brand destination or social presence," Mr. Naylor said.
Hulu may be met with questions about why a brand would want to pay extra money to create a co-branded ad specifically to run on Hulu, instead of repurposing their TV spots or producing a branded video with companies that aren't also trying to make money from ad sales.
Facebook is facing similar questions around its new "Anthology" program that pairs the social network's in-house creative agency and publishers like Vice and Vox Media with a brand to create a video ad to run on Facebook. In that case, Facebook's special sauce is its user data, which can inform the creative process to figure out how to make an ad that would have the best chance of appealing to its intended audience. Mr. Naylor said Hulu offers a similar edge.
"We're using our insights to how our users search the site, come back, content they're watching, what platforms they're watching [on]. So we're using our insights based on our data to inform the storytelling," Mr. Naylor said.