Targeted Ads, 2; Speeds & Feeds, 0
One potential application that could both improve the user experience and increase service provider revenue is targeted advertising, according to panelists here at a Light Reading session at the JP Morgan Technology Conference.
"Relying entirely on the subscriber leaves about 50 percent of revenue on the table. You need to seek non-user-generated revenue sources," said Matthew Marnik, director of marketing for Juniper Networks Inc. (NYSE: JNPR). To do this, telcos entering the market need to exploit more advanced methods of advertising, sort of like what is happening on the Internet with companies like Google (Nasdaq: GOOG), says Marnik.
Interestingly, panelists at last week's Future of Broadband event in New York said similar things. Tim Hanlon, SVP of Ventures at Denuo Group, a strategic media and advertising consultancy, pointed out that targeted advertising would be a good way for telcos to differentiate themselves in television, because cable companies have long promised targeted advertising but never delivered it. "There's the promise to deliver more personalized services," said Hanlon. "The ability to more precisely serve an ad message based on time, demographic, or psychographic would be an amazing leap forward. Everybody thought cable would do that." (See How Will Telcos Avoid Me-Too TV?)
Indeed, advertisers are growing weary of the traditional 30-second advertising spot on broadcast television. Juniper's Marnik points out that 97 percent of them want better viewer metrics than Nielsen ratings, which are becoming more and more irrelevant with the emergence of time-shifting services like video on demand. The need for user-targeted advertising is becoming more apparent.
IPTV technology could facilitate user-targeted advertising in a manner similar to the way in which Google ads show up on the side of your Web browser based on the content you are viewing on the Internet. In Marnik's presentation, he pointed out that by using a customer's IP address, the advertisers could pinpoint exactly what content you are viewing and customize the ads specifically to each user. This could all be done without revealing the identity of the end user.
With targeted advertising like this, telcos could charge an enormous premium to advertisers -– up to 20 times more per user than traditional broadcast ad spots, claims Marnik. This type of advertising happens all over the Internet, and the general feeling of the panel was that it could be the key differentiator for telcos as they enter the TV market.
Panelists said that such innovation is needed because the network solution alone won't help. "I don't think [Verizon's] FiOS is the answer," said Diane Sutter, president and CEO of Shooting Star Broadcasting here in Boston. "I think the early success means that if you're not satisfying the customer, they'll throw you off the bridge to anyone."
Without doing this, most panelists agreed, Verizon Communications Inc. (NYSE: VZ) and AT&T Inc. (NYSE: T) are merely "me-too" services with no way of differentiating themselves from cable, and most of their early success can be attributed to dissatisfaction with cable.
"I think in communities like mine, people are so fed up with their cable company that they'd switch to anyone," said Marnik.
— Raymond McConville, Reporter, Light Reading