Peter Kafka

Recent Posts by Peter Kafka

“Soft” Ad Sales Ding Hulu’s 2011 Growth

Remember back in the fall of 2011, when we started hearing anecdotal reports about slowing ad sales? Add Hulu to the list of examples: The company just reported a 60 percent jump in overall revenue for 2011 — which isn’t as much as it had thought it was going to do a year ago.

In a blog post, CEO Jason Kilar blames the shortfall on a “soft advertising market (economy) in the second half of 2011.”

The numbers: Hulu did $420 million last year, via a combination of ad sales and revenue from its Hulu Plus subscription service. But during the first half of 2011, it had told the world — several times — that it was “on pace to approach” $500 million.

In retrospect, it’s easy to see when sales started softening. In July, when Kilar reported his company’s Q2 numbers, he was still offering the same $500 million revenue guidance. But in early October, when he reported Q3 numbers, the guidance had disappeared from his update.

There are a whole lot of people who would like to report 60 percent annual growth. And the fact that Hulu revenue missed earlier projections by 16 percent  — “overall the Hulu ad business grew aggressively and Hulu Plus materially exceeded our plan,” Kilar notes in his post — isn’t going to be the biggest issue for the service by a long shot.

Hulu’s management and its owners — Providence Equity, Comcast, Disney and News Corp. — need to reach a fundamental agreement about the video site’s direction, and how the site fits into today’s entertainment landscape. (News Corp. also owns this Web site.)

But it’s still worth noting the miss, because Hulu is both a digital ad business and a digital ad business that sells very premium video.

It’s an article of faith among digital ad bulls that the industry will keep growing even if the larger economy takes a hit, because ad dollars will shift from old media, anyway. And advertisers are supposed to be clamoring for the tv shows and movies that Hulu sells — which is one of the reasons Google is trying to shift upmarket from dogs on skateboards, with its “channels” strategy.

We’ll start hearing other reports on the state of last fall’s ad market, and the outlook for the future, over the next couple weeks, when public companies start reporting their Q4 numbers.

And we’ll hear a lot more from Kilar himself, who will be appearing at our D: Dive into Media conference at the end of this month. If you want to see him in person, grab a seat.

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Nobody was excited about paying top dollar for a movie about WikiLeaks. A film about the origins of would have done better.

— Gitesh Pandya of comments on the dreadful opening weekend box office numbers for “The Fifth Estate.”