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Nov/Dec 2009 | Volume 1/Number 6
Eye on the Money

Content and Advertising Form a Perfect Union

By Grant Lenahan

Sometimes we can't see the forest through all those pesky trees.

For as long as I can recall, content and advertising have gone hand in hand, and for good reason. They're a great couple. This is because content gives such good insight into the readers' (or viewers' or listeners' or …) interests. At one level it's obvious – people who read about sports like sports. But it also turns out we can infer a lot of others things from an interest in sports, such as age, gender and other associated likes and dislikes. Ergo, beer features prominently in sports advertising and sponsorship. Keep this in mind.

This brings me to three consequent points on which I would like to elaborate.

First, our industry is changing as it switches from telephone and even data connections to a world made up of convergent, multimedia IP streams transporting everything from stock quotes and transactions to news clips via VoIP and IPTV – or similar telco- or cable-based video services. As such, content is now front and center. But along with this opportunity comes a new business model. Content, as noted, is almost always subsidized – maybe even made free – by advertising. Telcos need to realize that their first forays into walled gardens are not indicative of how they can succeed in the longer run. If telcos (mobile, broadband, cable) expect to make money from content and information, in addition to transport, they must adopt competitive business models, including advertising.

Content-rich media has always depended on advertising to make their business models viable. From the earliest days of newspapers, through radio, television and the Web, advertising has been the primary source of revenue – and thus, of growth. The corollary of this is that consumers have a clear value-price benchmark against which they will measure competition. If our industry does not employ advertising, our value proposition will be commensurately weak.

On the other hand, if we find ways for advertising to generate a bit more incremental revenue, and also be incrementally more relevant to consumers, then our value proposition will be stronger than those of existing content delivery media. As I have shown (or at least argued) in previous articles in this series, our industry has the technology not only to compete, but to redefine effective and acceptable advertising. While we could start by delivering beer ads with sports, we can aspire to do better.

This brings me to the second point – that correlation between sports and beer. While it's a good correlation, it's not perfect, nor is the connection between sports and gender (male) or any of the other partly correct stereotypes that drive much ad placement today. Advertisers know this. That's why CPMs (cost per thousand, or "mile") impressions are relatively low; why ad effectiveness is relatively poor; and why consumers sometimes find ads useless and annoying. Not every sports watcher likes beer. Similarly, they also like things other than beer. Ads would be more interesting, useful and profitable (higher CPMs at maybe lower incidences) if they were more surgically targeted. Therein lies another opportunity for the industry: Combining content genre with other factors to make a more accurate appraisal of each subscriber's interests (note that I just switched from plural to singular).

Within the group of sports watchers we may find those who don't like beer. But we can also get more sophisticated data: we can find those who only are interested in beer when they are at a ball park or when a promotion is being run close to where they are (both location and time aware intelligence). Given a subscriber's (opt-in) agreement communications networks can add that intelligence. The moral so far is that we must embrace the connection between content and advertising, use the genre information, but, and this is a big but, we can and should then make it more accurate than content alone allows. That's telecom's special sauce.

Third and finally, advertising and content can begin to blur. One recent over simplification defines the difference between information and spam as relevance. At the very minimum, advertising IS content. It may be commercial content. It may be forced on you. It may even be annoying, but it is content and it needs to be managed as such. So, for example, minors who should not access adult Web sites also should not receive adult promotions and advertisements.

With that said, we need to think about how advertising can be integrated into the fabric of information delivery. Search does this fairly well by, in effect, providing sponsored suggestions in response to search queries.

As above though, the communications industry – if it thinks across networks, media, time and history – can do so much better. Opt-in interests can receive coupons, discounts and topical alerts. Are these ads? The consumer may find them useful, as I do when I sign up for alerts in "deal" sites or for advance notice of sporting event tickets. But, in the end, these messages are paid for by merchants. So to me they are information, and to the merchant they are advertising. Eureka!

I have long advocated that communications service providers treat individuals as "markets of one" with individual policies, preferences, opt-ins, settings, contact lists etc., – powered by a personalized network infrastructure. As we look at advertising this seems to be the strongest link yet – one in which the value to sellers, and the relevance to consumers, both improve in response to more information and trust in the privacy of that information.

Content and advertising really are perfect together. Except that they may, with luck, become one in the same. And when they do, our value proposition to consumers, and the revenue streams associated with that value proposition, will change (improve) forever.

Grant F. Lenahan is vice president and strategist for service delivery solutions at Telcordia Technologies (www.telcordia.com).

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