Parks Associates Blog

Monday, September 15, 2008

Hulu is putting the cart before the horse

Last night, as I was watching a movie on Hulu, my browser crashed. Instead of restarting and cueing the movie back up, I just turned off my computer and went to sleep. Why not finish the movie, some of you may ask?

I feel that Hulu is trying to become profitable before it has completely baked its product, thus putting the cart before the horse. Last night, the ads precluded me from tuning back in. The most egregious offenses included:
•Inserting the same ad for every pod (except for the pre and post-roll)
•Inserting an ad targeting a mother with three kids into a war movie
•Inserting an ad in the middle of the scene (sometimes almost mid-sentence)

Where did Hulu go wrong?
Hulu had a strong start out of the gate. Unlike many other online products, Hulu had a simple interface that was easy to use and a large library. Features like the predictive search were also a nice touch and the simple list of available titles made content easy to find.

Where Hulu fell short is implementing its ad-supported business model. The two main mistakes are:
Failing to cap ad frequency. Traditionally, ad-frequency refers to how many ads a consumer sees in a piece of content (i.e., 1 per pod, 4 pods per 1 hour of content). Extrapolating TV model to movies, however, Hulu must also cap how many of the same ads the consumer sees in a single piece of content. Showing consumer the same ad 12 times will get them to leave the site, at least for the 30 seconds that the ad is on. This is counterproductive to what Hulu was initially trying to accomplish with shorter pods: reduction of ad avoidance behavior.
Sacrificing ad relevance for revenue. Hulu is not a charity. Its parents (NBCU and News Corp) expect it to generate profits. However, I would argue that the lack of basic targeting (in my case, to content) is counter-productive. As a 25-34 year old male, watching a war movie, I was subjected to 12+ BestBuy ads targeted at a mother of young children. I generally don’t list myself as an ad-avoiding type (in my line of work, it’s an occupational hazard), but after the third pod of the same creative, even I found myself browsing away from the video once the commercials came on.
Even better example was the HungryMan frozen meal ad right after a particularly-gruesome post-mortem dissection scene on Fox’s criminal drama Bones. Yum.

My guess is Hulu is feeling the pressure to demonstrate ROI, causing it to engage in practices that degrade viewer experience. If they don’t reverse course, these practices will likely kill Hulu. When Hulu first started, the experience was much more enjoyable. Now pods are more frequent and most of them (if not all) are by the same advertiser. Given the large size of a traditional advertising buy, one such contract can probably buy most of the inventory on Hulu. I also understand that given the ad clutter, brands prefer to “own” a piece of content (be the only advertiser featured in it). Ultimately, however, Hulu must remember who matters the most: the consumers. Negatively altering experience increases the appeal of traditional solutions: YouTube, BitTorrent or DVDs. Losing consumers at this point would represent the end of the advertising revenues and the end of the road for Hulu.

One path for Hulu to follow is to limit number of impressions that it sells to a single advertiser. Hulu should also consider adding pay tiers to its ad-supported service. Using those tiers for some of the more expensive movies can help alleviate the need to insert extra ad pods.

Regardless of which path Hulu takes, it must stop putting the cart before the horse. It must stop trying to be profitable before fully-baking its product.

1 Comments:

Anonymous michael said...

Great blog, Anton!

6:30 PM  

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