Is Hulu Scared of the Big, Bad Advertising?

(MoneyWatch)  Many reasons to read Staci D. Kramer's interview with Hulu CEO Jason Kilar at paidcontent.org -- particularly now that Disney has bought a stake -- but her best question was why she sees so many damn PSAs on Hulu instead of real, revenue-generating ads. (OK, she didn't put it quite that way.) Kilar didn't really respond to the question, saying:

If you look at 2008 versus where we as a founding team thought we would be and where we ended, we were ahead of plan financially on a revenue basis. If you take a look at the ambitious goals that we set out for '09, we just closed Q1 and we were ahead of plan as well and we're ahead of plan in Q2. We're very excited about how things are progressing.

That's really great, but let's back to the central question, why isn't Hulu selling more ads? The business model should be relatively simple, even if Hulu, like other video-streaming services, sticks to the belief that it's offensive to run anywhere near the same amount of ads as a viewer might see on regular TV. Here's why:

Hulu, like many newer online companies, suffers from an irrational fear of advertising. Look all around, and you'll see what I mean. The thing that Facebook, Twitter, and, yes, Hulu, all have in common is that somewhere, in the back of their heads, they think advertising is evil. Otherwise, they would have found ways to make money from advertising a long time ago. Dan Frommer, of Silicon Valley Insider's Business Insider posited today that, "Even with an awesome product and ad sales team, it seems it would be hard to fill Hulu's fast-growing inventory." With all due respect, I just don't believe it; in fact, it should be much easier for Hulu to monetize its content than Twitter or Facebook because advertisers have already made the ad units ... they're called commercials. With the exception of the need to edit a :30 down to a :15 every now and then, the heavy-lifting is done. (I should add that advertisers don't necessarily do themselves any favors either, being too questioning of metrics.) In fact, I just clicked on ten of what should be Hulu's easiest content to monetize -- its Most Popular Episodes -- and only 40 percent had advertising. You mean you can't sell ads off of "Family Guy" or "The Office"?

Not that the following is a bad idea, but it's somewhat typical that the most prominent ad I saw on Hulu today (above) was this countdown to a commercial-free Hulu primetime, sponsored by McDonald's McCafe. If that doesn't demonstrate fear of advertising, I don't know what does.