Parks Associates Blog

Monday, December 01, 2008

Coming Soon: Long-form Online Ads from Hulu?

In making a case for long-form online ad formats, Hulu released data showing that 88% of current Hulu viewers would opt-in to a long-form two-minute advertisement in order to avoid ads during the rest of the program. The study suggests that consumers don’t mind ads. They do however prefer being given a choice of ad content that is personally relevant. The findings also suggest that high opt-in rates are directly correlated to increased ad engagement.

While reflecting on Hulu’s findings, I question whether or not targeted long-form ads are a viable online ad format. Here are a few initial considerations:
1. One must consider the issue of audience engagement. True audience engagement is impossible to measure. The viewer could say they’d be willing to watch a two-minute relevant commercial. But what’s the likelihood that they will disengage from the commercial break in order to send an email or multi-task on a separate project? Especially when ad avoidance exists during a much shorter (30 second) ad format.
2. Long-form online ads are not a good fit for some advertisers. Imagine a two-minute ad for Wal-Mart. Now imagine this same commercial placed in the FOX drama House, which skews adults 18-34. (*Note analysis below.) Additionally, producing a long-form commercial that is creative and attention-grabbing is difficult to accomplish. With that said, it is possible. I immediately think of the Nike Football: Fate commercial. Great spot. While this is a one-minute advertisement, I think it would be difficult to extend the spot to two-minutes and retain meaning.

As I explore the idea of the long-form online ad, I decide to conduct an experiment on Hulu.com. I do so because I do not watch TV programs on Hulu and I want to familiarize myself with Hulu’s ad structure. Call me old fashioned, but I prefer to watch TV programs on a TV set. I analyze four programs based on Hulu’s most viewed list for the month of November 2008. The ad structure of these programs represents what a majority of the viewers experience.

Based on the analysis, I discover that the traditional 30 minute program (21-22 minutes online) typically does not contain two-minutes worth of commercials. So why would one choose to watch a two-minute ad even if they could choose the specific ad content? However, I believe it is feasible that one would prefer to watch a one-minute ad that is personally relevant in lieu of 4 random 30 second commercials (within a half hour program). Of course, it is important to note that Hulu’s commercial load varies with total commercial time accounting for 3 – 6% of total program time (based on my analysis). It seems acceptable that most online TV viewers would agree to watch 2 one-minute personally relevant ads in an hour long program.

Based on the analysis and initial considerations, extending ads beyond one-minute is asking too much of the viewer even if the program is free to view. I would also suggest that a two-minute ad (even if personally relevant and paired with the right advertiser and good production value) would inevitably cause audience avoidance. Even so, I do not make the assumption that Hulu plans to push long-form two-minutes ads in all of their online programs. In any case, Hulu is on track in seeking a better understanding of consumer advertising preferences in order to circumvent traditional advertising models.

Ad Structure of Hulu’s Most Popular Programs – November 2008

The Office/NBC Season 5/Episode 8 21:29
:05 pre-roll Nissan
:30 Wal-Mart
:30 McDonald’s sponsored The Reality House Show
:30 McDonald’s sponsored The Reality House Show
Total ad time: 1:35 (represents 6% of total program time)

Family Guy/FOX Season 7/Episode 4 21:49
:05 pre-roll Nissan
:30 McDonald’s sponsored The Reality House Show
:33 Airforce
Total ad time: 1:05 (represents 5% of total program time)

*House/FOX Season 5/Episode 5 44:04
:05 pre-roll Sprint
:30 Wal-Mart
:30 Wal-Mart
:15 Wal-Mart
:30 Wal-Mart
:30 Wal-Mart
Total ad time: 2:20 (represents 5% of total program time)

Heroes/NBC Season 3/Episode 7 41:37
:05 pre-roll Nissan
:15 Nissan
:33 Airforce
:15 Blu-ray disk
:15 Blu-ray disk Total ad time: 1:20 (represents 3% of total program time)

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