Telecommunications

Ad blocking: The service provider’s dilemma

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Ad blocking software poses a particularly interesting dilemma for carriers and service providers. On the positive side, you have the argument that very popular advertisement-funded applications such as Facebook, Google, Snapchat, Instagram etc. all generate traffic and data usage, which translates into revenue for operators.

The downside is that advertising, particularly video advertising, significantly increases bandwidth demands, which in turn results in the need for expenditure to increase capacity. In addition, it has been argued that unsolicited advertisements are a ‘tax’ on subscribers with volume-based charging, since they are charged for the unrequested and unsolicited advertisement data.

Who pays?

One answer to this issue is ‘sender pays data’ (see the dilemma of sender pays), where the sender of the advertisement is required to pay for the data, rather than the subscriber. Although sender pays is an answer to the data usage problem, few operators have implemented it and as a result, few Internet advertisers are familiar with the concept. It should also be said that it is not a popular option with those advertisers that are familiar with the concept.

Another far simpler answer to the advertising data usage issue is the use of ad blocking software by subscribers. The use of ad blocking software has been growing rapidly in recent months and operators are starting to provide services that bundle ad blocking software as part of their solution.

The dilemma for service providers is that by bundling and encouraging the use of ad blocking software, they improve the customer experience for users bothered by the advertisements, but they reduce their own revenue as the amount of data used is reduced. Three, a European service provider, recently announced that it would be implementing specific ad blocking software, starting in the UK and Italy. When faced with the dilemma, Three in the UK chose to side with its customers, who it felt were being unfairly charged for the data consumed by mobile advertisements that they had not chosen to receive. However, other operators are also seeking to generate increased revenue from advertising and implementing the ad blocking may reduce that opportunity.

In a public statement on its website, Three stated its principal goals in deploying the ad blocking capability will be:

  1. That customers should not pay data charges to receive advertisements.  These should be costs borne by the advertiser.
  2. That customers’ privacy and security must be fully protected. Some advertisers use mobile ads to extract and exploit data about customers without their knowledge or consent.
  3. That customers should be entitled to receive advertising that is relevant and interesting to them, and not have their data experience in mobile degraded by excessive, intrusive, unwanted or irrelevant adverts.
Net neutrality

Another issue operators may face by implementing ad-blocking software is that it may put them in conflict with regulators who are mandating that operators maintain net neutrality. Net neutrality laws in the EU do not allow service providers to block or degrade any Internet traffic. At the time of writing, ad-blocking software (network-level ad-blocking software) worked by detecting and suppressing mobile advertisements served up in both browsers and applications. In other words, the ad-blocking software blocks some Internet traffic (advertising traffic). The net neutrality questions do not end at traffic blocking. Some operators believe that advertisers should pay for the data consumed by their adverts. However, if some traffic was being paid for by advertisers and other traffic was not, then clearly all traffic is not being treated the same, which is one of the core tenets of net neutrality

Prior to Three and other operators in Europe, Digicel in the Caribbean had already become the first service provider to publicly adopt a standard policy across its network of uniformly blocking mobile advertisements by default.  Digicel will not provide the service as an optional add-on for subscribers, but it may allow subscribers to eventually opt-out of the service. Digicel has cited that ads consume as much as ten percent of a subscriber’s data plan allowance, and are seeking fair compensation from advertisers for use of its bandwidth, which Digicel says would be reinvested in its network.

Content costs

Communications Industry services and solutionsThe Internet Advertising Bureau (IAB) has warned there may be potential side-effects of blocking advertising content that could result in publishers being forced to charge users for content they currently enjoy for free.

“The IAB believes that an ad-funded internet is essential in providing revenue to publishers so they can continue to make their content, services and applications widely available at little, or no cost,” said Alex Kozloff, the IAB’s acting marketing and communications director. “We believe ad blocking undermines this approach and could mean consumers have to pay for content they currently get for free.”

Another question that arises as the use of ad-blocking software increases is whether or not zero-rated data plan services such as Facebook Zero and Google Free Zone, as well as groups such as Internet.org, should allow ad-blocking software to join their ecosystems. Facebook Zero is an initiative from Facebook in collaboration with a number of mobile service providers, where the providers waive data charges for accessing Facebook on phones via a stripped-down, text-only version of its mobile website, therefore limiting the ability for advertisers to provide rich content.

In trying to reach a resolution to the dilemma of ad-blocking, many service providers will seek a strategy that serves both their customers’ desire for fairness, quality and value for money, and their shareholders’ expectations for growth and profitability.  Service providers will need to carefully weigh the options available to them in order to improve Net Promoter Scores (NPS) through tactics such as ad-blocking, while at the same time seeking new innovative approaches to grow their business and market share through opposing tactics such as leveraging big data and analytics for data monetization opportunities.

Visit ibm.com/communications to explore more and follow @IBMComms to keep up with our latest activities and announcements

Originally posted on tmforum.org

VP and Chief Technology Officer, Global Telecom Industry at IBM

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