Hulu Changes Deal For Advertisers: Now They Only Pay When Viewers Watch The Whole Ad

This morning, at the Ad Age Digital Conference in NYC, Hulu CEO Jason Kilar announced a significant change in how the media company will charge its advertisers. Going forward, advertisers will only be charged based on a 100% completion rate. In other words, if viewers don’t watch the whole ad, it doesn’t count.

The change will be effective in both the free level of service and the subscription offering, Hulu Plus.

The new feature had already been in beta testing with companies including General Mills, Zenith Media, and Horizon Media, all of whom, predictably, touted the move a big step in the right direction.

AdAge cites Hulu’s current ad completion rate at 96% – a lot higher than the average of 81% for long-form content and 59% for short-form content. They also note that the change could bring increased rates from competition for the fewer spots available going forward.

According to Hulu SVP of Advertising, JP Colaco, the 100% completion rate for advertisers is just one of several ways the company has been trying to work closely with the ad community. Writing for the official Hulu blog, Colaco also cited older ad products like the Hulu Ad Selector launched in 2007, which allows viewers to choose among multiple ads to select the one most relevant to them. More recently, the company introduced Hulu Ad Swap, which allows viewers to substitute out the ad they are watching for one that they feel is more relevant to them. Hulu Ad Swap now has been used over 9 million times.

Hulu also announced today that the service has now passed over 2 million paid subscribers in Q1 of this year, which Colaco says is faster than any other video subscription service, online or off, in the U.S.

According to metrics from comScore, Hulu now has around 38 million visitors a month, and revenue of $420 million in 2011, up 60% from $263 million in 2010.

For comparison’s sake, as of the beginning of this year, Netflix was doing nearly twice as much revenue in a quarter as Hulu did in a year.

Although Hulu owners were shopping the service around last summer, the company has been moving forward, most recently with the introduction of original content. The service now offers series like the political comedy “Battleground,” a reality show from documentary filmmaker Morgan Spurlock “A Day in the Life,” and later this summer, “Up to Speed,” a travel series from “Dazed and Confused” and “Slacker” director Richard Linklater will arrive.

In January, the company said it would invest $500 million in content for 2012.