Why Hulu Won’t Run Pre-Roll Spots

NEW YORK Hulu, the newly launched video platform from NBC Universal and News Corp., is experimenting with different ad formats for short- and long-form content. One tried-and-true tactic it is not using: 30-second units running before clips and full-length shows.

For the 90 half-hour and full-hour programs it carries, Hulu runs sponsor introductions (rather than pre-roll commercials) at the start of the shows. Many have a single sponsor, with half-hour programs running two minutes of ads—about 25 percent the amount shown on traditional TV. (Hulu’s practice discourages advertisers from running the same spot several times per episode.)

“We think it’s a higher quality experience for users and advertisers alike,” said Jason Kilar, the former Amazon.com executive who is Hulu’s CEO.

In Web video’s early days, pre-roll spots have been the dominant form of advertising in both short- and long-form content, despite surveys that show high user annoyance with the format. Google tested pre-roll ads before launching its AdSense video network earlier this month and determined they provided a poor user experience.

Hulu has received mostly favorable reviews since beginning its beta period on Monday. One thing it is not, Kilar takes pains to stress: a place for cute videos of cats or other user-generated content that’s made YouTube so popular.

“We want to stand for premium video,” he said. “We clearly think that’s going to differentiate this business.”

The goal for Hulu is lofty, almost Google-like. “We won’t stop until we get the world’s premium content,” Kilar said. “Our appetite is insatiable.”

Hulu is launching with several big-brand advertisers, including Unilever’s Axe, Cisco, Nissan, Toyota and Royal Caribbean.

While much of the focus on Hulu has been on its long-form programming, Kilar said he believes its short clips, including some edited by users, would be a major draw. (Visitors can save and edit clips, e-mail them to friends or embed them on blogs or social networking profiles.) Hulu also has distribution deals with major Web portals and social nets like AOL, MSN, Yahoo! and MySpace.

For such short-form content, Hulu is also skipping pre-roll spots. Instead, it is embracing the new format of video overlays, pioneered by startup Videoegg and subsequently adopted by Google for YouTube. With overlays, viewers are presented with small ad invitations while viewing videos. Clicking such invites allows ad messages to play. Nissan is using video overlays to promote its Rogue SUV.

While Nissan’s overlays link to a standard TV commercial, Kilar believes more advertisers will use the invites to provide users with exclusive video content and allow them to play videogames or sign up for samples.

“The advertisers and agencies are catching up and recognizing there’s an opportunity to do these things,” he said. “It’s early days for sure.”

Kilar said Hulu would collect demographic information from users when it launches. While viewing videos on the site can be done without registering, features like playlists will require users to submit basic information like date of birth, location and sex. Hulu will use that data in deciding what ads to show, Kilar said.

“Our whole goal is to present high relevant ads to our users,” he said. “That means be very smart about targeting.”

Kilar said the overlay spots, which like regular video ads are being sold on a CPM basis, might eventually adopt performance pricing.