In the last installment I talked about the necessity for innovative pricing. The gist of that column was that in mobile broadband, one size fits all is really one size fits none – and is optimum neither for consumers (who have diverse needs, wants and budgets) nor for mobile operators. By tailoring various plans to various consumer niches, consumers can get more closely what they want, and communication service providers can maximize revenue.
This month, I will take this a step further, and discuss how CSPs can derive revenue beyond basic data plans and become an integral part of the content/information delivery value chain. In doing so, they can both receive a percentage of the revenue, which is of course good business, and, at the same time, improve the value proposition to both consumers and content providers – in effect their partners – another win-win if executed properly.
There are many ways that CSPs can be part of the value chain including billing on behalf of others; bandwidth or quality of service fees; or catalog/sales fees. But one stands apart from the others in its ability to generate higher quality profits and fundamentally change the economics of content. This is advertising.
Everyone is talking about advertising. And for every proclamation that it’s the next big thing, there is an equal and opposite proclamation that consumers don’t want it and it’s the next big bust. Both are simplistic analyses. To generate a win-win, we must fundamentally change advertising so that it is both more effective (that means more revenue available) and more relevant and useful (which means consumers will accept it more readily). Fortunately, relevance and effectiveness are tightly related.
I have written before about the virtuous cycle that can be created if consumers’ preferences and history are treated with respect and kept private, yet are used to send ads that are of value. Respect begets trust, trust begets opt-in information, and opt-in information begets better and more useful ads for both sides. It also strengthens the cycle. Yet this cycle depends, in part, on a single trusted entity to hold data in confidence with the ability to reveal it anonymously to improve the ad experience. Given the multitude of agencies, campaigns, ad engines, etc., there are very few entities that can do this in a holistic fashion, and only one that collects, by definition, each consumers context info: You, the CSP (News - Alert).
But there is more. The other key ingredient in most effective ads is context. Football is a strong context for beer ads. Roaming is a strong context for taxi ads. The Wall Street Journal is a good context for financial products ads. Location is a strong context for proximity-based promotional ads – the oft-quoted location-based services. Google (News - Alert) searches are strong context for the search topic. Context, overall, sells advertising at far higher rates.
Context and user preference and history are very strong drivers of relevance and revenue. But together, they are even more powerful, and this is the combination that CSPs can exploit – across sites, devices, media, technology and agencies. CSPs alone have access to much signaling data. And CSPs are one of the very few single points that can observe and hold relevant data and are trusted with it.
Interestingly, CSPs have the ability to drive up the price of ads and drive up the acceptance of ads by consumers. This is a unique position to improve fundamentally the product, and, of course, to take a portion of the economic surplus created by this new paradigm. Many content providers have been struggling to make their business models work. Free is not a business model, neither are ads that don’t generate sufficient revenue to cover the costs of premium content. Over time, I am certain, online content, whether from walled gardens (such as digital cable and IPTV (News - Alert)), or over-the-top players must be supported by a combination of non-negligible fees and ad revenues. And CSPs are in an ideal position to help make those fees and revenues larger and more sustainable.
That’s another win-win. NGN
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