CONTEXT EFFECT: HOW MOOD IMPACTS AD RECEPTIVITY

Julie DeTragliaHead of Hulu Ad Sales@HuluInsights

Barbara LefleinPresident & FounderLeflein Associates, Inc.@LefleinInsights

BACKGROUND THE TRUTH ABOUT AD RECEPTIVITYAfter two waves of Ad Receptivity research, here is what we know:

Ad receptivity is psychological not demographic

No receptivity is a small segment, LOWS are the ones to watch

Purposeful viewing has a positive impact on ad viewership

A change in ad options can go a long way

Distribution of GenPop TV Audience 13-54

Base: General population Phase 1 (n=1,660), Phase 2 (n=1,650)Source: Leflein Associates, April 2015 & December 2015Red text indicates Significant difference between Phase 1 and Phase 2 at 90% CI

OBJECTIVEHOW MOOD IMPACTS THE VIEWER JOURNEY

This new research explores A) When and why

viewers choose a particular TV platform

B) The impact of mood management on viewing behavior and ad engagement.

METHODOLOGYThree Phase Research Study

All respondents in Phase II & III subscribed to both:Hulu Limited Ads AND Regular TV

Phase I: Statistical Analysis of Waves I&IIRelaxed situations contribute to increased ad-viewership on Hulu

Phase III: Online Survey (New)A national sample of 500 persons 13-54 used to examine Hulu’s

platform advantage

Phase II: Hypnosis Focus Group (New)This method enabled us to elicit respondent descriptions of their moods while

watching shows on Hulu vs TV

THE VIEWER JOURNEYCHOOSING BETWEEN PLATFORMS

A WINNING COMBO:CONTROL, MOOD MANAGEMENT & COMMERCIALS

Getting commercial time down to a reasonable

amount

Making it easy to find

things to watch

according to my moods

Giving me more

control

74% vs. 21% 73% vs. 20% 72% vs. 18%

Q5. In your opinion which does these things better, Hulu or regular TV?Hulu vs. TV

Base: Total = Watch TV AND Hulu with limited ads (317)

VIEWERS WANT CONTROL OVER THEIR TV SCHEDULES

I use Hulu for a comic relief between movies or other intense shows

I save shows to watch on Hulu with others

I use Hulu to find and sample new shows

I have so many favorites that I use Hulu to catch up on the shows that have conflicting schedules on TV

I use Hulu to fill time when my favorites are not airing

I save shows to watch on Hulu for a time when I can savor them

I save shows to watch on Hulu alone

When I find a show that's new to me, I use Hulu to catch up on previous seasons

59%

63%

66%

68%

69%

69%

70%

71%

Q12. Use Hulu these ways: OFTEN/ALWAYS

Base: Total = Watch TV AND Hulu with limited ads (317)

SITUATIONS DICTATE PLATFORM CHOICE

Base: Total = Watch TV AND Hulu with limited ads (317)

Distracted

Wake up & start my day

As background noise

Rushed & have limited time

30%

33%36%

57%

51%

47%

Neutral

Exercising Sitting down to eat

33%

44%

36%

46%

Purposeful

Get home from school or work

Relaxing before going to bed

On a lazy weekend

48%

56%

66%

43% 39%

29%

Q1. Please indicate whether you would turn to regular TV or Hulu

MOODS INFLUENCE PLATFORM CHOICE

Base: Total = Watch TV AND Hulu with limited ads (317)

Relaxed Moods

You're relaxing with loved ones and you want to prolong that feeling of bonding

You've had a bad day and want some

comfort

You've worked hard and now you want to

treat yourself

0%

5%

10%

15%

20%

25%

30%

35%

56%

66% 67%30%

25% 26%

Agitated Moods

You're nervous or tense and can't think about anything but your

troubles

You have great exciting news but you have to kill time before

you can share it

34%

35%

36%

37%

38%

39%

40%

41%

45%

47%

36%

40%

Q3. Please indicate whether you are more likely to turn to regular TV or Hulu

Base: Across all platforms: watching a full hour of a show that’s not a favorite (n=277), one of their favorites (959), number one favorite (424)Source: Leflein Associates, April 2015

Not a favorite Among their favorites

#1 favorite

100121

146Index of commercials they'll watch if show is a favorite or not

PURPOSEFUL VIEWING HAS POSITIVE IMPACT ON AD VIEWERSHIP

Regardless of platform, viewership of commercials increases with favorability toward the show. When watching one of their favorite shows, the likelihood to watch the commercial increases by 21%; and 46% more likely if it’s their favorite show.

EVEN THE LOWS ARE MORE LIKELY TO WATCHADS ON HULU IN RELAXED SITUATIONS

Total Low receptivity Medium receptivity

51%45%

62%

30% 29%36%

You mentioned that you {always/often/sometimes} avoid commercials. But are there situations when you are more likely to watch commercials?

RELAXED SITUATION SUMMARY (in bed, laying on couch, lazy Sundays)

Hulu Limited ViewersTV Only Viewers

Base Ever avoid ads 2015: Hulu limited viewers (213), TV only viewers (210), Low recep Hulu (65), Low recep TV (67), Med recep Hulu (59), Med recep TV (53)

HOW TO DO IT RIGHT

59% 31%

Q2. How would you rate Hulu and regular TV when it comes to putting you in a good mood?

5 STARS

BECOME THE GO-TO PLACE FORMOOD MANAGEMENT

“If I’m in a bad mood, the first thing I’ll check is what shows I watch are waiting for me on Hulu. And if I see that little icon that says you have episodes waiting. That alone makes me feel better. I’m like sweet. That will uplift me.” TV

Base: Total = Watch TV AND Hulu with limited ads (317)

SUPERIOR FEATURES ENHANCE THE VIEWER EXPERIENCE

Ad SelectorCaptions

Movie TrailersNotifications

Homepage sliderHulu OriginalsOne longer ad

Top Picks For YouHulu Exclusives

WatchlistVideo Timeline / Scrubber

SearchbarCommercial count-down timer

Auto play

64%65%

70%71%72%

76%76%77%

79%80%80%81%82%82%

Q11. Give Hulu Top 2 Box rating in appreciation for these features

Base: Total = Watch TV AND Hulu with limited ads (317)

KEEP AD MODELSRELEVANT, TARGETED, LIGHTER

The commercials on Hulu are more relevant than the commercials on regular TV

The commercials on Hulu are more entertaining than the commercials on regular TV

I'm more likely to watch commercials on Hulu than on regular TV

Compared to Hulu, regular TV has more low-quality commercials and "infomercials"

The commercial breaks on Hulu are less disruptive than those on regular TV

Hulu is a friendlier place because it has less commercials than regular TV

62%

63%

68%

69%

79%

80%

Q6. How much do you agree or disagree with these statements?Agree somewhat/strongly

Base: Total = Watch TV AND Hulu with limited ads (317)

Q8. When are you more likely to watch/sit through ads?When watch

ing regu-lar TV15%

When watch

ing Hulu47%

Both the same38%