On TechCrunch Mark Suster compares Hulu to the oil cartel OPEC. I’m not sure what this point number 2 has to do with the cartel comparison, but I think it’s one of the more interesting points of the post:
2. Limited “Targeting” of Advertisements: The great promise of the Internet for advertisers was that they were finally going to be able to deliver targeted advertisements to users because they could finally know who you were. This has become a reality with banner ads, search ads, contextual ads and Facebook ads. But not Hulu ads.
Why? They know who we are, don’t they? Yes, they do. But they generally don’t even allow advertisers to purchase ads for a single show let alone ads targeting YOU by reading your cookies on your computer. So we have ads that are even less targeted than those on television. The reason lies in protecting the high price of broadcast & cable advertising rates. They are nervous about “trading analog dollars for digital pennies.” So advertisers have to buy “run of site” ads rather than show specific ones.
It was over a year ago now when I wondered why Hulu wasn’t targeting ads to it’s users. I haven’t run the numbers on targeted ads with lower volume vs. sitewide untargeted ads, but I’d have to think there’s a price point at which you can at least break even. I mean, Facebook’s advertising platform specializes in making it easy to target people based on tons of different criteria. Again, I haven’t run the numbers, but I think Facebook is making a lot of money.
Of course, even running the numbers won’t get to the heart of the reason that Hulu is basically having it’s hand tied when it comes to being able to innovate like other technology companies. For as long as the cable and satellite providers control that major distribution channels, the networks have no choice but to hamstring the efforts of other methods of distributions (even, obviously, ones that they support). Unfortunately (for me and other Hulu users), since the user base of people watching TV via the Internet using Hulu, Netflix, Amazon, iTunes, etc. is still tiny compared to the number of people who pay companies to provide them with TV (while most of the time also paying them to provide Internet access), the networks have to tread lightly when it comes to the user experience provided through these alternate services.
Cable companies (and satellite and other pay-TV providers) are certainly scared pantless when they realize(d?) that something like Hulu could easily make networks more money by showing targeted ads for higher rates (not to mention charging people $9.99 per month without having to hand any of that over to the cable company). But they still have the market share, and therefore, the power, to make sure that networks don’t get too excited about prospects of nearly infinite riches. Netflix has run into the same problem (over and over) in dealing with movie studios who still see DVDs as their major distribution channel (although that point of view is even more short-sighted than the view that cable companies will continue to maintain their dominance in the television distribution market).