Hulu goes upfront, acting like TV ad platform

What was Hulu doing last week making “upfront” presentations to ad buyers on Madison Ave? You could ask the same thing about AOL, Disney Interactive, Microsoft, Vevo and Yahoo this week.

The answer is that these online media companies are acting like TV networks. This development may dismay digital purists who have seen the online advertising as a unique and separate value proposition. But money talks, and TV generates lots of it. According to a report released last week by media measurement company Nielsen, in 2011 the U.S. market for TV ads totaled $72 billion.

This shift is noteworthy. Where much focus in advanced advertising has been on getting the TV to incorporate highly targeted capabilities of the digital platform, the online world now appears to be adopting traditional ways of measuring viewership.

Last week AOL announced that they are working with Nielsen to use a TV-based guarantee model for its online video inventory. And Hulu trotted out TV actors and for the first time made pitches to advertising execs about how original content (another novelty) in the works will attract eyeballs from a certain broad demographic profiles, such as men, aged 18-49.

In fairness, Hulu’s culture always has been relatively TV-centric, and not surprisingly so, given its ownership by NBCUniversal, Fox Entertainment Group and Disney-ABC.  But it is still a bit jarring to see new media stepping through an old ritual.

Aimed to influence buying or even extract commitments, the upfronts traditionally last from March to mid-May. This year’s schedule looks busy, but their role may be in transition. “The upfronts are slowly declining in importance,” said Bill Neimeyer, Senior Analyst with the Diffusion Group (TDG), interviewed last month on the question of whether VOD advertising would make it into this year’s upfronts. (He thought it unlikely.)

“It’s a fuzzy, imperfect futures market in advertising,” Niemeyer said. “Buyer and seller have zero visibility into what’s going to happen.”

That said, it remains one way to chase all of that TV ad money. While bearish on Hulu’s long-term prospects given the limits of the cord cutting and niche programming models and the threat from TV Everywhere initiatives, Bernstein Research Todd Juenger thinks Hulu is taking a reasonable approach.

In a recent note, he wrote that Hulu execs confirmed that they see an advantage to using Nielsen’s Online Campaign Ratings (OCR) method of selling traditional TV ads. “This will set up an interesting comparison against YouTube, which we expect will follow the more Internet-centric approach of delivering counts of ad impressions delivered against algorithmically decided and/or behaviorally-determined targeting,” Yuenger noted.

But if the goal is the “traditional TV ad spend,” then the Hulu approach is “superior” to Google’s. Why? “Because marketers would be able to plan and budget Hulu advertising within their TV planning and budgeting process.”