Seven (Often Stupid) Reasons Hulu Doesn't Have More Ads

(MoneyWatch)  Been meaning to link all week to a feature story in Adweek about Hulu, the most exhaustive 3000 words I've yet seen on the site's popularity -- and ad model problems. As I've noted in previous posts, given the site's standing as the second most popular video site, and as the go-to provider for video content advertisers are comfortable with, it's astounding just how many public service ads the site runs, even within its most popular content. The story looks at this problem from every perspective possible. I've bullet-pointed seven reasons for it below, but let's just say that if advertisers and Hulu can find a way not to monetize the site, they sure go for it. Here we go:

• Hulu was not expecting the 40 percent traffic surge that happened after the highly popular Alec Baldwin "Alien" ad aired on the Super Bowl, which upped the supply of inventory.
• There's an excess supply of broadcast inventory due to the recession, which has made broadcast a cheaper option than it has been in some years, taking away potential dollars from Hulu.
• Media buying agencies are set up to buy and profit from buying big globs of audience, and, even if the content on Hulu is often exactly what you'd find on broadcast, they don't buy that way.
• The site's owners -- which include NBC, Fox and Disney -- are intentionally holding inventory back for fear it will hurt the prices they can charge for broadcast. As one of those infamous unnamed sources explains: "They'll give up an additional $20-50 million in ad revenue rather than get the model wrong and cannibalize themselves."
• The CPMs (cost-per-thousand) Hulu charges are too high, equal to, or surpassing, those of network TV.
• Many advertisers have production issues. Either they don't have the rights to take a TV spot (which is ludicrous in this day and age) and put it on a digital platform, or they can't make the costs work of doing Internet-only video content, since those audiences are smaller.
• Though Hulu can tell advertisers many things about how their ads performed on Hulu, they don't break out data to tell them what program their ads appeared on.

At the rate I was finding reasons not to advertise on Hulu in this story -- I even skipped a few -- I thought that maybe I'd finally find some media buyer not buying the site because they didn't like its name. But if I've learned anything from all of the time I've been in the media and advertising business, it's that it doesn't matter if concerns people have about this or that media innovation are real; it only matters that they are perceived to be real. Unfortunately, despite NBC CEO Jeff Zucker's statement this week that Hulu is going to be cash-flow positive "soon", it's going to take a lot of work for Hulu to become as popular an advertising destination as it is a video consumption one. Kudos to Noreen O'Leary at Adweek for pointing out just how many problems there are.