Hulu Turns on Private Marketplace as Ad Buyers See a Recent Abundance of Supply
Link: https://digiday.com/marketing/hulu-private-marketplace-ad-buyers-abundance-supply/
Hulu is one of the go-to video streaming sites due to its wealth of digital video inventory available for its subscribers. Peterson’s article analyzes implications of Hulu opening a “new private marketplace (PMP) for advertisers and agencies to programmatically purchase video ads running across the streaming service’s on-demand and live TV inventory” (Peterson). This PMP will allow advertisers to directly bid on Hulu’s inventory without going through Hulu’s sales team. This new system gives the advertisers more power by allowing them to set their bids themselves at whatever price they deemed would be appropriate for the value of the intended audience. The transition to a PMP came at a time when advertisers were looking to invest more heavily on closed programmatic marketplaces; in-part due to the fact that PMP deals offer advertisers “the flexibility of programmatic buying” and the “certainty of knowing whose inventory they are buying by working with a direct sales team” (Peterson). This transition has proven to be lucrative, for Hulu, as they have pitched themselves to be “just like TV” and incentivized advertisers to invest even more in Hulu’s PMP. The growth in Hulu’s PMP market is parallel with Hulu’s audience growth – “In May, Hulu surpassed 20 million subscribers” (Peterson). Advertisers have speculated that Hulu’s decision to form the PMP was to be able to fill the growing supply of content. However, Hulu’s decision to form the PMP was to give advertisers “more choice and control” in how they buy ads from Hulu.
This connects to the auctioning unit in class. Most of these advertising auctions on online platforms use a first-price auction format – for reference, Google recently switched to a first-price auction for its advertisements. As we have learnt in class, it is not a dominant strategy in a first-price auction to bid you true value. Hulu’s PMP exemplifies why this is the case. The understanding from the lecture is that during a first-price sealed-bid auction, the bidder will never bid above their valuation of the product as an outcome would result in a loss as their returns will always be negative. With this concept in mind, the reason why Hulu’s PMP increases their revenue is that they are changing the value of their consumers in the eyes of the advertisers. Hulu intends for its PMP to appeal to both brand advertisers and performance marketers and they achieve the by attracting more spending from the “direct-to-consumer advertisers who are shifting their spending away from Facebook and towards TV” (Peterson). The value of Hulu’s consumer base is higher in the eyes of these investors and as such, given the new ad bidding system, advertisers are willing to pay more in order to get ad time. Therefore, this new space, although marketed under the pretences of giving advertisers more freedom and choice with ads, will prove to be more beneficial economically for Hulu than the advertisers.