Operators Mad for Ad Money

Heavy Reading recently surveyed a variety of players in the next-generation advertising arena, and found that service providers are extremely bullish about advertising.

Nearly 90 percent of those surveyed agreed with this statement: "Generating incremental revenue from advertising will be a critical requirement for service providers within the next five years." Of these, 43 percent "strongly" agreed – indicating either a very strong belief in advertising or a well-defined strategy and roadmap already in place.

Line losses and an increasingly competitive broadband access business are driving interest in new revenue sources for service providers. The deployment of IPTV facilitates this interest, since advertising has long been a part of the TV business. Cable networks, for example, rely on a dual revenue stream, with ad revenue added to revenue from carriage fees paid by pay-TV operators for the right to distribute their channels.

Service providers have two significant advantages they can offer advertisers. First, given their digital networks, they can target delivery of relevant and interactive ads to appropriate homes. Second, they can deliver advertising messages across three different device platforms: TV, PC, and mobile device. This means they can reach different consumer segments, some of which may be unreachable or not efficiently reachable by any single medium. (For a great example and detailed analysis, check out a recent Light Reading Webinar on this topic. More data from our study is also available there.)

In our survey, service providers recognized both advantages. Targeting was seen as the capability most likely to work for them, and more than 80 percent agreed that it is critical to enable advertising across multiple device platforms.

Previous attempts to profile consumers for advertising have set off raging controversies, so service providers must tread cautiously in terms of tracking viewers. U.S. cable's advertising initiative, Canoe Ventures LLC , suggests an alternative approach: Rather than directly collect data, use existing data on consumers to target advertising from firms such as credit reporters or direct-marketing organizations.

Another alternative is to use an opt-in approach, trading a freebie for the information. Of course, the consumer should also be free to opt out at any point. Blyk , a U.K.-based MVNO, has been quite successful with this strategy. The company has gained 200,000 subscribers by offering free texts and voice minutes in exchange for volunteering personal data and receiving ads.

Heavy Reading's "Next-Generation Advertising Study" also surveyed media buyers, agencies, and advertisers. More details in my next post.

— Aditya Kishore, Senior Analyst, Heavy Reading

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