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Friday, November 26, 2010

Will advertisers be made to pay for mobile data use?

Here's a fun question for all the DPI and mobile optimisation vendors to try and answer....

What percentage of mobile data traffic is made up of adverts? And is it rising or falling?  And why isn't the implicit cost of transporting adverts being paid by their originators or agencies?

In the fixed world, the incremental amount of advertising traffic is probably relatively small, even including embedded Flash adverts in web pages, a few seconds of pre-roll video on some clips, banners, emails and so on. I'd be surprised if ADSL users get more than 1GB of ads per month, perhaps even just a small fraction of that. Set against a typical capped home broadband service with 20, 50, 100 or 250GB that's not really moving the needle.

But if you're using broadband on a USB modem with a 1GB or 3GB cap, I suspect that advert traffic starts to build up quite heavily as a component. And on a smartphone with 500MB a month, it's quite possible that advertising (across all inventory types) is 20%+ of total traffic, especially if you include email spam and browse "real Internet" web pages.

Some of the discussion last week at the Broadband Traffic Management event concerned whether (and when) it was appropriate or legal to optimise content, or even block applications or services. Would the user (or regulator) be irked if you compressed video streams, or changed the codec or frame rate? Highly contentious and a discussion for another post.

But it surprises me that the compression & optimisation specialists (Bytemobile, Openwave, Vantrix, Acision et al) don't target adverts and spam as "low hanging fruit". Ad-blocking as a service would reduce users' bills, speed up their browsing and could be configurable / opt-in like the PC browser add-ons.

Users would likely complain or churn if operators blocked or degraded YouTube or Facebook. But there's unlikely to be much of an outcry if intrusive adverts are binned by the network, as long as there was the equivalent of a "spam folder" to check there were no incidents of miscategorisation.

People might even pay for the service, if it improves overall QoE.

I bet that in some cases, the capex / opex savings on the network from lower traffic levels, would outweigh the telco's revenues generated from their own mobile advertising business. The poacher should turn into a gamekeeper. If the telcos don't do it, then third-party proxy services should offer it as a service, especially when the user is roaming. (Companies like Vircado already offer roaming optimisation).

I often get involved in research & consulting about the possibilities of telcos charging "upstream" content or application providers for access or QoS, notably through my work with Telco 2.0. It's often difficult to imagine Skype or YouTube or NetFlix paying "cold hard cash" - I generally think that business-focused cloud computing, or perhaps cloud gaming are the most likely to be prepared to pay. But actually, advertising agencies and ad-serving companies should probably go to the top of the list, as soft targets.

Neither the telco NOR the user wants (much of) their traffic clogging the network. It's also an area in which public attitudes to Net Neutrality could be swayed to see the positive aspects. There's is also the chance that Google ends up footing much of the bill. Where it will get much more difficult to enforce is around in-app advertising, though.

Ultimately, my belief is that the advertising industry has had a free rein for far too long. It's fat, lazy and complacent. Why should advertisers assume they have the rights to "use my retina for free"? Sure, there might be some brands or campaigns I'd want to opt-in to, but in an ideal world, we'd have digital contact lenses and advertisers would have to pay us cash to occupy parts of our field of view. And I'd gladly do a rev-share with a telco or other service provider who managed the billing & collection of fees on my behalf.


Antoine said...

Advertisers paying to use the pipes to send data; that's interesting. And from a user's perspective, could end up being an interesting "ad-blocking" like mechanism. I wonder if networks though would lose some of their ability to be sustained - or at least services on top of the connections themselves that they normally push. Would definitely trim the clutter...

Raman said...

Well, in vast majority of cases the page that the user is accessing only exists because of these advertizers. Imagine if there was no advertizing on facebook, they would have to charge each user a dollar or two a month. Its all a question of how the user pays, as there is no such thing as free lunch. I pay 50$ a month for broadband access of 100 Mbps so that I can get a lot of content for 'free' on internet. The content is 'free' becoz of the advertizers. No ?

Stephane said...

Advertising is progressively morphing into self-profiled recommendation rather than the existing cookie-based spies and ad networks. Services like Hunch and StumbleUpon will place the power of targeting and advertising into users’ hands. In this (long-term) context, users won't see any issue in paying for mobile data induced by self-personalized ads.

Yeoman said...

Great analysis. I see some operators making more definitive steps in this direction, and are notifying subscribers to that effect. For example, Verizon Wireless recently sent this privacy notification re. mobile advertising:

Notice the "counsel" at the end of the notification: "You will receive mobile ads whether you participate or not, but under the advertising program, ads may be more relevant to you."