Hulu is slowly learning it doesn't matter how scalable its business model is as long as the networks' fear factor remains.
The network upfronts were last week, and while all of the channels have been experimenting with different formats and platforms, none of them are ready to put their money where their mouth is just yet.
Many big name networks and brands have spent the past few years proving their comfort with online media, but as the upsfronts showed, they are still not following up with a large chunk of their advertising budget.
According to a recent Council for Research Excellence study, 99% of all video is still viewed on television. And the networks are still going to look for dollars on TV -- while they can get them. Margaret Clerkin, co-head of Mindshare's Interaction unit, tells AdAge:
"In the past, everyone was trying to prove they 'got' digital. That they had a digital value proposition to put forward in the marketplace... This year it seems much more of a PowerPoint element. They are recognizing that digital isn't core, and they're focusing on their core business, which is the big screen."
This is problematic for Hulu, which has been hard at work getting both networks and advertisers comfortable with spending substantial amounts of money online. Hulu is far behind video giant YouTube in popularity, but its professional quality content is much easier to monetize. However, if the networks get nervous about sharing their content, Hulu's advantage over YouTube could quickly disappear. (A position they tested earlier this year when they temporarily gave Internet television purveryor Boxee access to their contant and quickly suffered the rath of the networks.)
Hulu says that Nielsen research proves it has "unusually high brand recall and purchase intent." But the incredibly measured nature of online advertising can be an inhibitor when advertisers are desperate for something to get them out of a dire situation.
A buyer who spoke to New York magazine last week put it this way: “They say a TV ad is 30 seconds long and a mile wide,” he tells me. “I can get an ad on Yahoo! Finance, and will it get me a transaction? Yes. Will it change the brand for consumers? No.”
That notion of television advertising may be wishful, but many advertisers simply want to ring as much out of the old business model as they can before jumping into a new one.
An industry insider tells AdWeek: "They're still figuring digital out, and they need to find a way to increase those digital dimes to at least quarters or 50 cents. They'll give up an additional $20-50 million in ad revenue rather than get the model wrong and cannibalize themselves."
Hulu has partnered with high quality marketers like Nissan, Toyota, Intel, Procter & Gamble, General Motors, Cisco and Chanel, but because of its large catalogue and the nature of online content, it's hard to "sell out." Meanwhile, the static nature of television provides it with a much more limited inventory and increases demand for primetime ad slots.
The problem for the networks of course comes when their audiences completely stop watching television ads and their business model hasn't migrated online properly. But it looks like the networks will burn that bridge when they get to it.