US OTT market leader Hulu is targeting 50% of ad revenue from non-intrusive ads over the next three years, according to the company's SVP of ad sales, Peter Naylor.

Innovative ad formats, like non-intrusive, are the key differential that is driving OTT at the expense of traditional TV, which he says has “reached its ceiling”.

Marketers want TV alternatives and OTT is answering that, Naylor told Digiday.

“It’s [OTT] also the superior alternative because it’s on demand, and the audience is more digitally native than on linear. Everything we’re doing today is inevitably where everything [in TV] will be sometime in the future,” he said.

The OTT space enjoyed some unique attributes, Naylor says, adding that he is bullish on the entire space. 

“We have half of television’s ad load, but we recognize that’s still an interruptive ad model.

“We are embracing new models, complementary ad models. One of our stated goals is to have 50% of our ad revenue be non-intrusive in the next three years. It’s kind of a moonshot statement, but I think the pause ad will be one of the things that gets us there.”

Hulu announced last month that it would introduce the pause ad for its 25 million subscribers – most of them on an ad-supported package.

Playing TV-style ad breaks when content is paused doesn’t work, Hulu believes. The viewer is irritated that they hit pause and content is still streamed; and the advertiser isn’t happy because their expensive 30-second video isn’t being watched.

Instead, the Hulu pause ad is more like a semi-transparent billboard appearing on the side of the screen – it gets the advertiser’s message across in an instant, and is more accepted by viewers.

Naylor believes that as long as ads are “thoughtful and relevant”, people will be tolerant.

“When you go too far, when you start jamming ads, that’s when you risk people leaving.”

Hulu’s ad revenue was $1.5 billion in 2018. Revenue from direct-to-consumer and performance marketers was up 85% percent year-on-year, the company says.

Naylor says Hulu is already working with over half the DTC brands on the IAB’s top 250 DTC companies, but there is still massive potential.

 “The estimate is that there are about 3,000 of these companies who are disruptor brands and DTC brands – we are chasing that,” he said. “The growth is coming, and we like it.”

Sourced from Digiday; additional content by WARC staff