By: April Terry, Media Planner & Jim Poh, SVP, Communications and Media Director
Hulu has become one of the most dominate Connected TV players in the US. The platform currently boasts over 30 million subscribers and is continuing to grow. Content is king and much of the platform’s recent user growth can be attributed to original programming. Programs available only on Hulu include the highly popular Handmaid’s Tale as well as Fargo and Shut Eye. Hulu’s content-driven growth strategy has taken advantage of people’s “FOMO” by creating a highly desirable platform for viewers and advertisers alike with this engaging and unique programming. Nearly 10% of subscribers are opting in for Hulu’s Live TV channel bundle in place of cable as well.
Hulu is a paid service with 2 tiers of subscription; one with no ads at $11.99/mo. and another at $7.99 that includes ad support. Nearly 70% of Hulu subscribers opt to watch content with ads no doubt justifying the cooperation in watching ads with the $4 “payment” from Hulu based on the psychological principle of reciprocity. As a social construct, reciprocity states that people are frequently more cooperative in response to friendly actions than would be predicted by the self-interest model.
In addition to increasing subscription-based income, Hulu is experiencing an unprecedented Q4 in ad revenue for 2020. With several unusually intense culture moments in-play, Hulu has been increasing the cost of their ads to keep up with higher-than-normal paid advertising demand. The fourth quarter of the year usually has a media roster that includes sports and the holiday season (hallo-givings-mas) which typically attract more advertisers, but this year’s roster has been even more bloated. All the usual pillars are in place with the additions of political advertising and a shift of some linear investments to Hulu. We have seen Hulu increase prices by 66% this year alone and predict another 20% cost uptick for Q4 when all is said and done. When the media landscape returns to “normal” at the
beginning of the year in Q1 2021, we expect cost efficiency to improve but probably not to CPMs seen pre-Q4 2020.
While the CPMs for Hulu are increasing, there is no need to abandon ship. The platform still boasts great attributes—users spend an average of 4 hours watching per week. And like linear TV, Hulu users typically watch with other people. People use CTV devices most heavily in the living room, where everyone can watch together. This has been amplified since March—attributed to the beginning of widespread shelter in-place ordinances. Nielsen data reports that co-viewing has increased and remained higher than pre-COVID-19 levels across most demographics. Since March 2020, 61% of Hulu viewers are co-viewing. That means that we are getting “extra” impressions beyond just the subscribers making Hulu a cost-efficient alternative to broadcast TV against many broad demographic groups even at current CPMS.
Based on these price increases, you may still want to adjust your Hulu investment to enhance cost efficiency of your digital video buys especially for the remainder of Q4. Here are Intermark’s tips for weathering the Hulu price bump:
- Identify multiple ways to reach your target audience using video.
- Consider programmatic, full-episode-player video ad placements. With a targeted audience buy, your ads will be served to the right person at the right time.
- Social media is another good place to reach specific audiences, with video ads currently at competitive pricing.
- Revisit Hulu in Q1 2021.