Hulu: Advertisers Pay Only When 100% of Ad Is Streamed

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Internet TV service Hulu will begin charging advertisers only when 100 percent of an ad has been streamed.

"Hulu advertisers will not be charged unless their advertisement has been streamed through completion; in other words, an advertisement that has been 100% delivered. There will be no extra cost to Hulu advertisers for this service," said JP Colaco, SVP advertising at Hulu, in a blog post. The new pricing model will apply to advertisements served on both Hulu's free and subscription services.

Hulu executives did not disclose what percentage of ads are streamed 100 percent.

"I assume they did the math to determine the vast majority of ads were completed, so they will not have to take a revenue hit. And they will have a great talking point with ad buyers," said Kevin Lee, CEO of Didit, a digital marketing agency, in an interview with ClickZ when asked about the new pricing approach.

Hulu CEO Jason Kilar, speaking at the Ad Age Digital Conference in New York, also said the online video service now has 2 million paid subscribers, up from 1.5 million at the end of 2011.

For the year ended December 31, 2011, Hulu's revenue totaled $420 million, an increase of 60 percent over 2011.

"The advertising industry is very robust online and at Hulu specifically. The Hulu Plus business is resonating with consumers," he said, when asked what's fueling the company's revenue growth.

About 90 percent of the advertising creative on Hulu is repurposed from TV advertising, he said. "There is a great opportunity [for advertisers] to be smarter and get better results," Kilar said. On the other hand, he recognizes a challenge in developing advertising creative that's optimized for Hulu. "One of the first rules of advertising is to be easy to buy. And it's easy to take existing creative and use it and leverage it in an environment that's familiar, the 30 second spot," he said.

"Hulu's 100 percent completion rate model is a big step in the right direction that will positively impact digital video performance," said Donnie Williams, chief digital officer, Horizon Media, in a prepared statement.