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Operators Should Block Ads to Get Their Cut, Startup Says

Sarah Thomas
11/24/2014

Israeli startup Shine has the noble goal of turning wireless operators from dumb pipes into bright pipes, but its methodology, which is dependent on the legality of ad-blocking programs, has been dubbed everything from insane to egregious to "never-gonna-happen."

The reactions are interesting considering CMO Roi Carthy says the level of operator interest is so sky-high his 23-person team can't keep up with the demand.

So, first, the backstory: Shine Technologies was founded in 2011 to reinvent the mobile anti-virus sector with algorithms so good Carthy says it attracted a $20 million acquisition offer. Shortly thereafter, as a courtesy to a friend at an operator, Shine's team used its real-time tracking technology to look into who was using the operator's bandwidth and discovered background signaling from mobile advertisers on its network.

Through its technology, it could see down to what ads were riding its network and how many clicks they were getting. Carthy says another set of algorithms let it then calculate current rates for the relevant media and project the total worth per day, week, month and year. He isn't giving up any numbers, but said they were significant enough to upset the operators that were not getting any cut. It's a situation they're used to with many over-the-top apps, but Carthy says it was a shock to them to realize the extent of ad network's so-called "abuse."

"Being outsiders, we didn't realize this was so traumatic to them," Carthy says. "They knew they were being abused; they knew there was a party in their background, but now there's a dollar value. It's a bunch of money."

This knowledge caused Shine to shift its focus dramatically. It still offers its anti-virus software, but its primary focus is on a new enemy: advertising. Its technology, being marketed as AdSight, now essentially treats ads as if they were malware allowing operators to entirely block them -- whether in-app or in-browser -- at their discretion, forcing the ad network to strike a deal with the operator if it wants to be displayed.

Carthy calls this operators regaining control of their own destiny, but it is easy to see why it would raise the ire of regulators, consumers and, of course, the ad industry, especially in the US, where net neutrality discussions are well past heated. But Carthy maintains that, even in the US, mobile ads don't fall under any type of regulation. (See Obama Backs Net Neutrality, Stuns Industry.)

The CMO says the company hired a European firm to look into this for them, and it determined that if a subscriber chooses to opt in or out -- depending on the region and its requirements -- it is perfectly legitimate to block an ad. That is the key loophole.


For more on mobile-related topics, visit our mobile content page here on Light Reading.


Legal or not, however, not everyone agrees it's justified. What Carthy calls abuse from the ad networks, JackDaw Research analyst Jan Dawson calls "misinformation about carrying content carriers always harp on about -- that is, that they're somehow not being paid adequately for carrying the content already."

Dawson doesn't see the startup having much luck in the US, but says some European operators may be "desperate enough to try this" in their quest to take a cut from Google (Nasdaq: GOOG) and others.

Shine is, in fact, counting on this desperation for business and has so far seen it play out in its meetings. Carthy expects deployments in Europe first, but says he's in talks with all the major US operators as well. And, rather than focus on regulation, he says they are concerned about, one, how blocking ads might affect the user experience, and, two, how they can position this as an amicable agreement with the ad networks rather than an act of war or revenge.

As for the first priority, Carthy says the user experience is not disrupted. In fact, it may be even more positive without so many ads cluttering the small screen. As for the second, the operators are exploring what they can offer in return -- things like better targeted ads or guaranteed quality for video ads. The ad industry may not be so amicable, but Carthy maintains they knew this day was inevitable.

"There will be some push-back, but it's not as militant as some could imagine," he says.

Carthy says his last remaining challenge is existential, simply convincing the carriers to commit to the transformation from dumb to bright pipes instead of maintaining the status quo.

Operators have to have the confidence to jump in the water, though you can imagine why they'd be reluctant. Many have experimented with mobile advertising in the past, selling customer data to advertisers to better target their ads, hosting ad networks even offering their own location-based ads. There's almost always backlash from consumers and regulators. (See Verizon Rewards Customers for Their Data.)

"I can only imagine the outcry from both users and content providers if ads started being blocked or replaced by the carriers," Dawson tells Light Reading. "It's a pretty egregious bit of interference in the free flow of content between content providers and users, especially if the carriers aren't transparent about it."

That said, Carthy is confident -- cocky, even -- that his technology is legally sound, mutually (more or less) beneficial and completely necessary. Now the operators will have to decide if the potential payback is worth the inevitable backlash.

"This is the moment in carriers' lives, the end of a chapter and beginning of a new one, moving from a dumb to bright pipe," Carthy says. "It won't slow down, so do it now or give up entirely."

— Sarah Reedy, Senior Editor, Light Reading

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Kruz
Kruz
11/29/2014 | 10:21:43 AM
Re: Perfectly reasonable, no?
Ideally no content should be removed. Operators should be smart enough while pricing this. I dont beleive a small fee will stop content provider from being present. But as said, the operator should be fair with all providers in order to avoid having to deal with regulators. 
Joe Stanganelli
Joe Stanganelli
11/29/2014 | 5:58:16 AM
Re: Perfectly reasonable, no?
@sreedy: Backlash?  Bah.  I mean, maybe, but there are enough other free and freemium competitors for most web services that either 1) are not ad-supported or 2) are ad-supported but are loss leaders anyway that customers will still have options.
Joe Stanganelli
Joe Stanganelli
11/29/2014 | 5:55:02 AM
Re: Perfectly reasonable, no?
@sreedy: Good point, but at the same time, the net neutrality debate has centered on the treating of content that customers actively want/attempt to download.  Customers presumably have no desire for ads.

So the question here is if net neutrality cuts both ways.  Customers would presumably have a right to deny content coming their way, so Verizon blocking ads could arguably be an extension of that right (i.e., to keep customers' costs and data plan usage lower).
sarahthomas1011
sarahthomas1011
11/25/2014 | 9:31:20 AM
LinkedIn discussion
Lots of good points being raised over on a LinkedIn discussion of this article:

 
  • Ryan Koontz
    Ryan Koontz Sounds like a great way to stir the pot with the Feds... It could fly in completely unregulated markets.15h ago
  •  
    Art King
    Art King Sarah, the Ad folks will write code around the outside of whatever these people want to do. Expect Ad networks to operate below radar, be stealthy, and immediately change methods when they are blocked.13h ago
  •  
    Pete Mastin
    Pete Mastin Will drive content developers toward more in-content marketing (he says, as he sips his coke).13h ago
  •  
    Sarah Reedy
    Sarah Reedy Agreed, Ryan! Interesting perspective, Art. They say their algorithms are pretty advanced, but we'll see. Pete, could be, but Shine says they can block that too!13h ago
  •  
    Peter Tomfohrde
    Peter Tomfohrde Mobile operators are not likely to lead in this area. Most want to drive data usage and if the customer is paying for the data consumed, that's good business. If you block the ads which pay for the content, the likely response is the content gets blocked from the operator. This means no data consumed, upset users, and a tough discussion with the regulator. I don't see a mobile operator wanting to be the first party to cross that bridge. However, a party like Apple controls access to their ecosystem. Apple monetizes access as a primary business model may feel differently.
sarahthomas1011
sarahthomas1011
11/25/2014 | 9:30:46 AM
Re: Perfectly reasonable, no?
Yeah, if the content provider pulls the content because it was paid for by ads that are now blocked, then there would be backlash. I don't think operators can expect to do this without a ripple effect of responses. 
brooks7
brooks7
11/24/2014 | 8:00:36 PM
Re: Perfectly reasonable, no?
Mitch,

 

Only in one scenario.  If I have free, ad supported services (Gmail) that now cost me money...I might scream.

seven

 
Mitch Wagner
Mitch Wagner
11/24/2014 | 4:45:37 PM
Re: Perfectly reasonable, no?
"I can only imagine the outcry from both users and content providers if ads started being blocked or replaced by the carriers," Dawson tells Light Reading. 


I'm skeptical. I can certainly see content providers screaming bloody murder about this because it interferes with their revenue model. But it's hard to imagine a significant number of consumers complaining. And handful who do complain will turn out to have ties to the ad industry. 

I mean, seriously, can you imagine any user calling up their ISP to complain that they're not seeing any ads? Seriously?

 
sarahthomas1011
sarahthomas1011
11/24/2014 | 3:11:28 PM
Re: Perfectly reasonable, no?
Yep, customers are the one group who will probably not care about this. Transparency is important, of course, but this benefits them, at least in the short term.
MordyK
MordyK
11/24/2014 | 1:57:39 PM
Re: Perfectly reasonable, no?
True! but I'm not sure you'll have many volunteers manning the barricades to get those as back :)
sarahthomas1011
sarahthomas1011
11/24/2014 | 9:49:45 AM
ad replacement -- clarification
Per Dawson's quote on the backlash if operators block or replace ads, Carthy followed up to say: "I didn't suggest that Carriers are going to or want replace ads. In fact, this was never raised even once in any conversation with any Carrier, in any geography."

Users might perceive it as playing favorites with what ads do get through, but Shine isn't suggesting replacing their ads with operators own ads...rather just blocking them entirely. I think consumers might like that!
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