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Operators, Advertisers Sync Up

In a recent Heavy Reading survey, nearly 90 percent of service providers interviewed expected advertising to be a critical revenue source in the next five years. The study also surveyed the advertising community, asking advertisers, ad agencies, and media planners and buyers for their opinions on service providers' role in the advertising value chain.

Advertisers were far from dismissive of the service provider's role. Half of respondents agreed that telcos would be important members of the advertising value chain in five years. They were also in sync with some of the key elements of service providers' strategies in this space. For example, 76 percent of advertisers agreed that multiplatform advertising would be an important differentiator, compared with 81 percent of service providers. In particular, advertisers picked mobile advertising as an important area for growth. Only 15 percent had bought mobile advertising last year, but 35 percent expected to buy it in the coming year.

However, there were also important differences. Service providers see targeting as the most valuable capability they can offer, but advertisers seem even more interested in tools that facilitate buying and measuring media in a convenient manner and provide timely access to data.

This is actually a rather important issue: It suggests upstream challenges for service providers and vendors trying to get into the advertising ecosystem. If buyers are challenged by new buying mechanisms and systems, they are unlikely to buy new forms of advertising. They are also unlikely to change the media buying systems with which they are comfortable. This could create a logjam in the development of next-generation advertising.

It's certainly been an issue where local TV ad sales are concerned. In the U.S., the majority of TV advertising revenue is generated for national sales. Big-budget advertisers would rather make one purchase (on a national network) and reach the entire country, rather than cobble together scores of local-market deals with various cable operators to enable the same reach. A convenient purchase and measurement process will be essential to gain acceptance from the advertising community.

This sentiment is echoed by the response to another question. When asked if they would pay a premium for multiplatform ad buys, advertisers were willing, with more than two out of every three selecting that option. However, 21 percent accepted that they would pay a premium – but to a middleman, not a telco. This means service providers might need to develop a broader ecosystem to enable multiplatform advertising, where the initial transaction is managed by a partner such as a national network or online company.

North American cable operators have developed a consortium to address some of these issues, and the five major U.K. mobile providers are also working to develop a common platform for advertising. These kinds of initiatives will be critical if service providers are to generate significant advertising revenues in the future.

— Aditya Kishore, Senior Analyst, Heavy Reading

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