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Hulu Is Off to a Strong Star/ Hulu cleans its room / Hulu Sweats the Details


NBC and News Corp.'s Hulu Is Off to a Strong Start

Nearly a year ago, NBC Universal and News Corp. (NWS) launched a video site called Hulu. The Web cognoscenti scoffed at two Old Media dinosaurs taking on YouTube. But the derision has abated of late. Thanks to a huge library, Hulu is attracting millions of viewers and signing up advertisers like Bank of America (BAC), Best Buy (BBY), and Nissan.

In effect, NBCU and News Corp. gambled that people are willing to watch full-length TV shows and movies online. In the Age of YouTube (GOOG), that's a contrarian position. The Web video king has become ubiquitous with clips rarely more than five minutes long.

You won't find choppy videos of kids playing Metallica guitar solos or pirated TV shows on Hulu. Everything is legally obtained and made in Hollywood: 4,000 hours so far of content—including clips and full versions of TV shows (from Lou Grant to Family Guy) and classic movies (from In the Heat of the Night to Jerry Maguire). It's a bid for advertisers leery of the often outré offerings on YouTube, which does not feature the lucrative 15- to 30-second commercials Hulu places before or during TV shows and movies.

Hulu did something else unusual. Rather than forcing people to come to its site, it cut deals with portals like AOL (TWX), Comcast (CMCSA), MSN (MSFT), and Yahoo! (YHOO) to show Hulu-branded video on their sites. In August, according to Nielsen Online, Hulu exceeded 100 million video streams for the second month in a row. That puts Hulu a distant second to YouTube, which had 4.7 billion streams in August.

Advertisers also have taken note that a prized demographic of viewers aged 18-44 seem comfortable watching long-form video online. Hulu users on average spent 256 minutes in August watching videos, up from 169 minutes in July. That was the longest time spent among all Web brands, according to Nielsen. "Now that's an engaged viewer," says Robert D'Asaro, a digital advertising strategist at media-buying firm OMD. Not "somebody bouncing from clip to clip on YouTube."


Ad buyers say that for full TV episodes Hulu is charging three times more per CPM—the cost per 1,000 viewer impressions— than broadcast networks. Is Hulu making money? Likely not. The site shares revenues with the portals and the studios that make the shows. And Hulu can't offer advertisers global reach because it hasn't yet cut deals with the studios to run shows overseas. "All I can say is that we're well ahead of plan," says CEO Jason Kilar.

In the meantime, Kilar, a former Amazon (AMZN) executive, is looking for ways to make Hulu more compelling to users and advertisers alike. Viewers can now choose what product they want to see from a particular advertiser. For example, by clicking a button they can opt for a Nissan ad touting a sports car rather than a minivan. Another option: watching a two-minute movie trailer before a show rather than ads during the program. Kilar says companies besides Hollywood studios will soon be able to put longer ads before videos. Hulu is also giving advertisers a glimpse of who is watching what videos. "We can tell them what kind of person is watching these seven shows, for example," Kilar says, insisting that viewers' privacy is sacrosanct.

One Hulu fan wrote recently that the elegant site and eclectic array of shows and movies made her "head explode in a brain spray of awesome." It doesn't hurt that Hulu runs maybe two to five minutes of ads per hour, vs. about 16 minutes on TV. The question is whether Kilar & Co. can afford to keep it that way—and make money.



Hulu cleans its room

Hulu announced Tuesday that it now has more than 900 series and movie titles in its library from over 100 content providers. So in conjunction, the video hub--started as a joint venture between NBC Universal and News Corp.--has done some cleanup work.

Hulu now has a "Channels" option where you can sort through its programming by genre, from "comedy" to "reality" to "anime." The site is working to beef up the latter in order to attract Japanese animation's millions of Web-savvy fans. There's also a "Web Originals" channel to filter the programming that's available only online--ranging from the new Lonelygirl15 series The Resistance, to short comedy series produced by the Saturday Night Live team, to Dr. Horrible's Sing-Along Blog. If you don't know what that is, I suggest you search for it on Hulu.

Indexing by channels is something that other video-content providers, like Joost, have already been doing for months. Hulu didn't need it at first--launching with a handful of movies, Web series, and NBC and Fox shows. At that point, giving the option to sort by genre would only have made the selection look limited. Now that Hulu has gotten much bigger (two words: Stephen Colbert), it's a different story entirely.

Genre browsing is also another way to get advertisers in the mix. Hulu's "food and leisure" channel, for example, is currently sponsored by sweetener brand Splenda.

Hulu has also rolled out a few more new features, including actor-based search (a queue for "Rainn Wilson" brought up not only episodes of The Office but also red-carpet interviews with the oddball actor) and discussion boards for specific episodes and programs.


Hulu Sweats the Details

Jason Kilar, CEO of online video site Hulu, would like the world to know how much he cares about street sweepers.

Speaking this morning at the OMMA Global conference in New York, Kilar began his talk by plugging Disneyworld (his first employer) and Walt Disney’s attention to detail, before explaining how Hulu plans to become the main aggregator of premium content online.

When he worked at Disneyworld, Kilar learned that old Walt thought that the street cleaners at the amusement park were some of the most important people on the payroll:

“Walt Disney was inspired to create the theme parks after seeing the garbage at others. ...If Hulu can create a culture as obsessive as Disney — that's something we'd be incredibly proud of."

Kilar says that every decision on the site is obsessed over, from the size of the logo to the resolution of video thumbnails to the content the site shows: "there is no better business model than obsessing about quality.”

And it appears that attention to detail has paid off. Hulu recorded 119 million of the 11.4 billion streams consumed in the month of August and boasts 8 million monthly users. Even better perhaps, PC World Monthy named Hulu the #1 product of 2008 (the iPhone came in at #2).

So how is Hulu capitalizing on its popularity? In terms of advertising, "we’re letting users self-select what they'd like to watch," says Kilar.

Hulu viewers now get a choice of ads that they will be shown before viewing video content. Though the choice is limited — all ads are from the same brand — viewers can choose if they'd like to see a Nissan ad for a mini-van, SUV, or compact car or choose between a spot for Coke, Diet Coke, or Sprite. Viewers on can also choose their formatting. Many videos ask if the user would rather watch one pre-roll ad or a fewer, shorter ads within the programming.

These options let advertisers know exactly how their spots and formats are performing, which is in line with Hulu's efforts to "create a service that users, advertisers, and content owners unabashedly love."

“Our appetite is insatiable," says Kilar. "We’re trying to get all of the world’s premium content.”

That’s all well and good, but what about those pesky networks that haven’t yet signed on (and may never agree) to partner with Hulu? The recently shuttered WB network launched this month with the entirety of its stable of shows at CW and CBS content cannot be viewed at Hulu. And ABC’s Executive Vice President of Digital Media Albert Cheng may have appeared with Kilar on an OMMA panel directly after his keynote speech, but that network remains a holdout as well, choosing to stream on various sites that do not include Hulu.

Kilar said that Hulu’s position as an aggregator of content comes from being as clear as possible about the traction of the business. “By being transparent about results, we’ve moved from having two content providers to over 90,” says Kilar. “With monetization rates that they feel good about.”

If Hulu succeeds in pulling audiences to its site, they may just get enough visitors to make revenue sharing profitable for all the networks. But if individual networks can make their online content popular enough, they may feel even better about the monetization rates they can get alone.