Can banner ads enable Hulu to finally challenge Netflix?

Image by Flickr user cantoni

The rivalry between Netflix and Hulu is rich in storylines. The two big-name internet video streaming services for mainstream Hollywood content (and beyond) have so much in common and yet so many key differences.

Netflix got huge by effectively killing off the Blockbuster business model on the strength of snail mail-distributed DVD rentals and quickly pivoted, launching its on-demand streaming service in 1999 and going public three years later. Hulu launched in 2007 as a partnership between Fox, Disney/ABC and NBCUniversal, the bastard child that “the industry” seems unsure what to do with.

When we wonder about big entertainment business’s vested interests in pivoting into “over-the-top” content (OTT), or the questionably scrupulous tactic of throttling end users’ bandwidth access to specific services, these are the two companies to keep our eyes on. And they’re clearly keeping tabs on each other too – Hulu even went so far as to poach Netflix’s head of marketing last month.

Hulu is freemium, offering an advertising-supported version with somewhat delayed releases and less complete archives of content, while Netflix is premium-only, offering zillions of titles behind a paywall. They both offer TV shows and movies alike, but Netflix only streams episodes once full seasons come out on DVD, while Hulu keeps up with air dates and doesn’t offer nearly as many full-length features.

Do banner ads even drive any real business impact?

Banner advertising is hardly fashionable among digital marketers, mostly because of the channel’s abysmal clickthrough rates, which hover at around 0.1%. A Hubspot blog post from last year pointed out that the average web user is statistically more likely to complete Navy SEAL training, give birth to twins, survive a plane crash, be admitted to MIT or climb to the top of Mount Everest than actually click on a banner. Ouch.

On the other side of the banner debate are marketers who argue that banner haters are simply doing it wrong, or are at least measuring success with the wrong metrics. How do the executives over at Netflix and Hulu feel about these questions?

In the past year, according to SimilarWeb PRO, Netflix has acquired 24.6 million desktop visits via banner clicks, compared to Hulu’s six million, but these numbers may be misleading. Hulu is far more dependent on banner ads for user acquisition than Netflix – when we compare the proportion of the total traffic each site gets from banners, Hulu’s 0.55% is 45% higher than Netflix’s 0.38%.

banner share netflix

Netflix’s display advertising referrals over the past 12 months

banner share hulu

Hulu’s display advertising referrals over the past 12 months 

banner share - netflix vs hulu

Comparing Netflix and Hulu’s share of banner referrals

They’re both clearly seeing decent ROI on banner spending, too, or they wouldn’t do so much of it. As the underdog, Hulu’s got some banner referral share catching up to do, but their stats for the last three months indicate they might finally be making some headway.

display visits to hulu vs netflix

Could Hulu finally draw more traffic via display advertising than Netflix by the end of the summer?

Banner messaging

Using SimilarWeb PRO to compare the ad creative each site has been placing, the messages they’re sending to their audiences are completely different. Hulu’s ads are clean and generic, promising on-demand content as a benefit unto itself. Netflix’s ads, on the other hand, are a bit more cluttered, but they’re more specific, too, piggybacking on successful entertainment brands that they own (and that they don’t), offering free trials and multiscreen access as key benefits.

Creative from Hulu's top banner ads

Creative from Hulu’s top banner ads

Creative from Netflix's top banner ads

Creative from Netflix’s top banner ads

Banner media placements

According to SimilarWeb’s crawlers, over 77% of the two sites’ banner clicks came in through the Google Display Network and Adf.ly.

Display ad network share for Netflix compared to Hulu

Display ad network share for Netflix compared to Hulu

The competitors seem to use different mixes of ad networks, and to leverage them in different ways. Because Hulu’s free version is an important element to their conversion funnel, and their smartphone app is only for their premium service, they’re less likely to target mobile users (via the Appnexus network, for example) than Netflix is. But because Hulu’s free content is far more friendly to deep link sharing than Netflix’s paywall allows for, content discovery networks (like Outbrain’s native ad network, for example) make more sense for them.

A detailed breakdown of Hulu and Netflix's use of various display networks

A detailed breakdown of Hulu and Netflix’s use of various display networks

Banners vs. other paid media channels

Netflix benefits from 95% of the clickthroughs from the greater pool of websites offering referrals to both streaming platforms, so they’re clearly the victors when it comes to relevant inbound links.

referrals to netflix and hulu via inbound links on other websites

Third-party websites sending far more traffic to Netflix than to Hulu

Netflix has also dominated Hulu historically in paid social referrals, but Hulu doesn’t seem interested in this marketing channel in the least, and Netflix seems to have more or less abandoned it too since January.

paid social

The past 12 months of sponsored social media referrals to Netflix and Hulu

And speaking of social referrals, why isn’t Hulu crushing Netflix here? Hulu allows users to post links to episode excerpts like specific Saturday Night Live sketches, for example, while Netflix’s fully paywalled content is hardly share-friendly!

organic social

Why does Netflix get so many more organic social media clicks than Hulu?

The two companies’ paid search referrals seem to be commensurate with their relative market share, so if Hulu wants to catch up, this channel could be an opportunity – especially if they get less generic with their marketing messaging and start leveraging timely buzz episodes in their search ad creative.

paid search

Comparing the trajectories of paid search referrals to Netflix and Hulu

Lots of questions for the future

There’s so much unknown about the way this will all play out in the years ahead, too. Will original content continue to be a differentiator? What’s the real story behind Netflix’s apparently strategic move to shun its search traffic opportunities? Can Hulu ever come close to Netflix’s market share? Is their ownership group too wide a partnership to make competitive, bold moves? Will more targeted streaming services like HBO GO or NFL Game Rewind emerge as contenders? Who will be the first to aggressively court international markets?

Will there be a “cord cutting” backlash when millennials start having babies, or will audiences continue to ditch cable in favor of web-based services like these?

Business Insider's alarming statistics on falling cable TV subscriptions, which may be paving the way for premium streaming service growth.

Business Insider’s alarming statistics on falling cable TV subscriptions, which may be paving the way for premium streaming service growth.

As people’s “second screen” experience preferences evolve, whose device integrations will emerge as most comfortable? How will related technologies, like Facebook’s controversial new “I’m watching” auto-detect sharing tool, play into this all? Stay tuned.

About the Author -

Ben Jacobson is a freelancer specializing in digital marketing, content and community management for startups, small businesses, travel publications and entertainment brands.

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