This fall, new episodes of The Office, 30 Rock, and other hit shows will keep millions of online eyeballs glued to Hulu. But some advertisers are reluctant to pay the high rates the online video startup is charging to reach those audiences, and have started weighing their options elsewhere.
Currently, Hulu charges an average of $40 for every thousand views of an ad, according to Philippe Sloan, who buys ad space for clients of New York marketing agency Targetcast tcm. With ad space alongside videos on portal sites like MSN and Yahoo! running at about half that price, and cheaper options becoming available through YouTube and video ad networks, he says some clients are pulling ad dollars from Hulu and testing the effectiveness of other channels. “I think there’s going to be pressure on the site to bring their rates down,” Sloan says.
Hulu, a joint venture of TV networks Fox, NBC Universal, and – since May – ABC, no doubt gives advertisers plenty of bang for their buck. Its impressive library of TV shows and movies attracted over 457 million views in July, according to comScore, making it the fourth most-watched video site. (Google’s YouTube is No. 1, with nearly 9 billion views.) Those viewers spent an average of 6.1 minutes per video – by far the longest on the Web. “Hulu still has more attraction than most sites because of the nature of the content and because it has more long-form content,” says eMarketer’s David Hallerman.
For now, Hulu’s strategy of charging advertisers more and placing fewer ads in each show appears to be paying off: the company has managed to grow revenues each consecutive quarter so far this year, according to a source familiar with its financials. But will the model continue to work if advertisers have a broader range of less expensive choices? According to Sloan, the average cost-per-thousand-ad impressions has already fallen, from a high of close to $50. Hulu declined to comment on what it charges advertisers.