If you’re not a regular subscriber to Wired magazine, it’s worth the 5 bucks next time you’re at the airport if only to read the feature article on the new Fox/NBC online TV venture called Hulu (or you can just read it for free here). The Hulu story is a great lesson in new product marketing by not one, but two large, stodgy corporations with much of their business stuck in the status quo. Jason Kilar, the 36 year-old Hulu CEO managed to throw together an online television program with thousands of shows in a matter of weeks.  Hulu is growing rapidly and starting to challenge YouTube.

Aside from the outstanding innovation case study, Hulu is serving as a new benchmark in the future of advertising and mass media. The company is still showing advertising, as expected, but it has significantly decreased the number of ads as compared to traditional broadcast television. According to the article, Hulu is charging more but serving far fewer ads.

Let’s say the average prime-time cost per thousand viewers (CPM) ad rate is $25, which is a reasonable estimate. Television shows are averaging 8 minutes of commercials for every 30 minutes of programming, which means 16 30-second slots at $25 each. This makes the “effective” CPM for a program equal to $400.  On Hulu, the company claims that ad rates are “two to three times” that of broadcast TV. Let’s call it 2.5 times on average, meaning the ad rate is $62.50. However, Hulu is only showing two minutes of advertising per 30-minute show, or only four 30-second ads. As a result, it’s take is $250 per show, meaning that for every viewer who watches The Office on Hulu instead of regular TV, NBC loses 47% of its ad revenue.

You can’t protect old business models artificially.” – Peter Chernin, President, News Corporation

How is Hulu getting away with this? Well, the company realizes that the only way to win in online video is to put its consumers first and provide more value. And it believes great content and a modest amount of advertising will be satisfactory for the greedy online video viewer. The hope is that viewers rely on Hulu versus YouTube and other free and/or illegal options such as BitTorrent. The results seem strong so far: One analysis suggests that Hulu could beat YouTube in revenue this year.

Aside from dramatically cutting the amount of advertising per program, there are some other user-friendly marketing options here. Hulu sometimes offers the chance to select which ads you see. And there is a thumbs-up/thumbs-down button for advertising, which supposedly helps ensure that you receive better interruptions in the future.

I certainly do not believe that Hulu represents Meaningful Marketing.  It still relies on an interruptive advertising model that gets in the way of the content viewers actually want to see. But Hulu’s moves and early success are proof that the only way to win in the future is to get closer to what people want.

Side Note: While Hulu shows a dramatic decrease in advertising, the Chicago Tribune just revamped its newspaper to increase advertising to 50% of the total content.