Two weeks ago, Hulu made its entire run of historic films from the Criterion Collection available for free, no Hulu Plus subscription required. It was wonderful, and it was terrible — mostly because Hulu supported the promotion with ads. Luis Buñuel's magnificent dark comedy The Exterminating Angel was never meant to be broken up by commercials for Pizza Hut.
Movies just aren't like most other kinds of media. They require immersion, while the entire point of advertising is to distract you and monopolize your attention. Even commercials and trailers before movies at the theater have begun to feel like a chore. I paid a lot of money to be here. Don't monetize me. There's a fundamental disconnect, but at the same time, the idea of "free movies" is magical. It drives us to piracy, ill-conceived promotions, and badly-edited, bowdlerized TV re-broadcasts. We just can't figure out how to make it work.
HitBliss, a small company in Lexington, Massachusetts, is the latest to try. "We started this in 2008 with a vision to find a way for people to access the content that they want online without having to endure intrusive ads when they're watching it, or being confined to [paying] by credit card," HitBliss co-founder and VP Sharon Peyer told The Verge. The model Peyer developed with her husband, CEO and co-founder Andrew Prihodko, has a rare frankness and clarity that just might give them a fighting chance to actually pull this off. It launches in a waitlisted beta today.
Advertising's basic premise: customers' attention is worth money
The premise is deceptively simple. Ads and movies are compartmentalized. In one mode, HitBliss is a store where customers can rent streaming movies or buy TV episodes, just like iTunes or the Xbox Marketplace, with a similar catalog of available titles and similar availability windows. HitBliss has deals with three of the six major movie studios (Warner Brothers, Paramount, and Universal), Starz, and TV production houses to offer Hollywood movies in the DVD / transactional window and TV episodes the day after air. (Peyer says HitBliss is close with two of the remaining three Hollywood studios and hopes to have all six, plus more TV content, by the end of the year.) As a customer, you can pay with a credit card or PayPal account, or with earned credit on your HitBliss account.
This is where HitBliss is different. You earn credit toward TV shows and movies by watching advertising — TV commercials, movie trailers, polls — in what HitBliss calls "Earn Mode." The ads are overwhelmingly high quality video, and not spammy: Peyer says the company will eventually introduce a self-service platform like Google AdSense, but for now it's limiting advertising to Fortune 500 companies. (Even when it becomes self-serve, ads will be screened and approved.) And the credit viewers earn isn't denominated in Xbox points or Facebook credits or Bitcoins, but actual dollars. According to Peyer, using dollars makes viewers care when they earn money, care when they lose it (more below), and mentally match the "free" entertainment they watch to a real dollar value. It's the first advertising platform I've seen that makes advertising's fundamental proposition perfectly clear and transactional to end-users: customers' attention is worth money. Here. Here is your money.
A fully customizable targeted ad platform
HitBliss also makes it clear that not everyone's attention is worth the same amount of money. In Earn Mode, a customer's ad queue is prioritized to show her ads with the highest per-second value for that customer. You can earn credits faster if you're willing to part with personalized information for targeted advertising: location, gender, age, income, web and search history, activity on retail sites, viewing history on HitBliss, etc.. Essentially, anything and everything, short of full purchase histories or a user's social graph, that's used for targeted ads online today, can be used to deliver videos that match ad campaigns at HitBliss.
You could watch movie trailers all day, but targeted ads for popular products earn more credit faster
In an age when companies are sucking up as much user information as possible to store, repackage, and remonetize, even if they don't immediately know what they'll do with it, the idea that HitBliss will aim to make a profit just by earning more from advertisers than it pays to movie and TV studios is, frankly, a stunning throwback. Part of my brain has grown so cynical that I don't entirely believe it. But Peyer and HitBliss say that this privacy control is built into the architecture of the service itself.
Pandora for ads
Once a user opts-in to receive targeted messages, says Peyer, "the HitBliss app retains the user's profile information. Then the user's profile information looks at the advertiser's criteria… The matching happens locally, within the app." The only thing an advertiser sees is whether a customer was a match for the ad campaign and then her behavior with the ad. Did she watch the entire thing, jump to a different ad, or navigate away from the site? Did she click through to a related coupon or offer? This will also earn you more credit on HitBliss. It's all been rationalized into a direct transaction. And in theory, a higher level of personalization offers more relevant advertising.
Because it presents one ad after another in a stream users control and that learns from the information users provide it, Peyer calls Earn Mode "Pandora for ads." And really, the advertising platform is HitBliss' product; movies and television are simply a proof-of-concept. The goal is to create a giant online user base of viewers who are willing to watch targeted ads for discretionary cash, which can be used toward a wide range of products — apps, books, games, anything.
Getting paid for watching means you're being watched, too
In a very real sense, users are also being watched. HitBliss' value proposition to advertisers, apart from personal targeting, is that HitBliss' app ensures viewers pay attention to the ads they're being paid to watch. If you move to another tab or window or mute your computer, the ads stop, and you don't get paid. Periodically, a widget will pop up to ask "are you still there?" with a countdown clock, to ensure that viewers don't play ads and physically walk away. If the clock gets to zero, you lose your credit, not only for that ad, but for all of the ads played since you last interacted with the site. This isn't a freebie. This is a focus group. This is Mechanical Turk. This is attentional plasma donation. You are expected to hold up your end.
What are HitBliss' more obvious drawbacks? It's available for Mac and PC, with Android and iOS apps coming by the time it leaves beta — but for now, it's not available for smart TVs or set-top boxes. The only way to get the movies on your TV screen is to hook up your computer with an HDMI cable. But there's little reason to do that; for now, HitBliss' video is only available in 480p resolution. (The company says it's working on HD video and apps for smart TVs and set-top boxes.)
There are good reasons why online video has been dominated by giant companies like Apple, Amazon, Google, and Netflix. It's technologically difficult to do video streaming at scale, and a big retail operation with lots of personal data flowing through it presents an attractive opportunity for hackers. HitBliss' CEO Andrew Prihodko says the company "uses multiple well-established CDNs (Content Distribution Networks) that also successfully serve content for major video sites on the internet," as well as "one of the largest credit card processors in the country to handle financial transactions. The user's credit card information is in the custody of the credit card processor. HitBliss only instructs them who to charge and for how much." And by only storing personal data locally and not transmitting it to its own servers or to advertisers, HitBliss says it can keep that information more secure, too.
HitBliss lives and dies by its ability to convert watching ads into real value at a rate customers are willing to endure
My last worry is about the earn rate for advertising. In my demo with HitBliss, we were able to earn about $5 of credit, enough to rent a feature film, by watching a couple of TV-length commercials and a long movie trailer. That exchange seems very favorable to the customer: it's not much more than you'd watch for an episode of TV on Hulu and much less than you'd see before a movie at the theater. If it's close to that in practice, customers will probably be pretty happy. If customers have to watch 20 or 30 commercials to put together enough scratch to watch a movie, they'll leave. It's just easier to pay the money, and if you're paying money, you might as well pay it to iTunes or Amazon as pay it to HitBliss.
Where HitBliss has a real opportunity is to fill in as the media source of last resort. Dying to finally see Argo, but it's not on Netflix, you don't want to keep paying $5 for rentals, and you're sick of pirating good movies? You can watch a bunch of commercials on the bus and then fire the movie up on your laptop when you get home. Is that enough for HitBliss to sustain itself as a business? That depends on whether they can keep delivering the goods.