Zeugma News

What are the lines between "advertising" and "information"?

Tue, 27 May 2008 00:00:00 GMT

We all seem to have some sort innate ability to distinguish between what we consider “advertising” and what we consider “information.” Maybe it comes from years of being inundated with both. But I was thinking the other day that those lines seem to be blurring more and more. I was using my Google Mail account, reading my email and exchanging emails with a friend about flight options to Palm Springs. Google, in exchange for its free email service presumably, puts unobtrusive ads around your email. I soon realized that Google was using keywords in my email to display more relevant advertising. As I was emailing with my friend, I noticed ads for companies offering discounted flights to Palm Springs! For me, this was more “information” than “advertising,” because it happened to be what I was looking for. Is that the distinction between the two? If we’re presented with information we want, do we categorize it as “information,” and if it’s unwanted, is it “advertising”? In that case, the more relevant the information/advertising (Infotising? Advermation?) is to us, the better?

Clearly, Google and others are already doing this type of thing. More and more ISPs are also using behavioral data to present us with more relevant ads. Some people are scared of this, but wouldn’t we all be better off being presented with more of the relevant information and less of the stuff we don’t care about?

But it's supposed to happen that way

Tue, 13 May 2008 00:00:00 GMT

I am continually astonished by people bemoaning the fact that growth in broadband subscribers in North America is slowing. According to broadbandtrends.com, the number of North American broadband households reached 76.3 million recently, out of a total of about 135 million households. This represents about 56 percent of the total available market. Since it is mathematically impossible to exceed 100 percent (unless households start clamoring for multiple broadband connections, an argument I have yet to encounter), and in fact broadband penetration will likely plateau somewhere between 80 percent and 90 percent, it is inevitable that broadband growth would slow as the market becomes saturated. Why is anyone surprised by this?

I have met with a number of service providers that enjoy broadband penetration rates as high as 30-40 percent. These providers are smart enough to realize that, in most markets, they will actually plateau at around 45-55 percent, depending on the competitive landscape. Consequently, these providers already know, ARPU growth fueled by increases in broadband penetration will begin to slow and they need to begin looking at services they can offer on top of broadband.

On the one hand, as covered in a recent GigaOm post, this move to new services may simply constitute a move to higher speeds. But data from a recent survey conducted by IDC shows some resistance among consumers to moving to higher speeds. According to the survey, roughly two-thirds of consumers are sticking to the lowest or middle tier in a typical three-tier broadband lineup. Anteing up for ultrafast broadband that might be required only occasionally is something even the tech savvy have resisted.

More astute broadband service providers are detecting this resistance and offering compelling and relevant services on top of broadband. These run the gamut from the management of home wiring to network-based security, but one service that is drawing increased interest among providers is to automatically increase bandwidth for certain traffic flows. And charge for it.

Daunting challenges

Wed, 07 May 2008 00:00:00 GMT

Carriers face some pretty daunting challenges with respect to their capital-intensive networks. Once upon a time, the network defined the service and value proposition, be it voice, video, or data. Convergence promised carriers an opportunity to consolidate resources and pursue higher-revenue triple-play services. In general, such networks are defined by increased capacity for the delivery of video services. This extra capacity comes at significant cost to the carrier but with the promise of additional revenue. However, the fine print on the contract is that the carrier is not the only one who benefits from this capital investment. Over-the-top (OTT) service providers benefit tremendously from the increase in capacity to the subscriber. Increased bandwidth, together with compression technologies, shifts the value proposition away from the distribution channel (e.g., the carrier network) and into the hands of the content distributors, who are in a better position to attract content and a global customer base.

Speaking with carriers around the world, this problem is acutely understood, but strategies to tackle the problem vary considerably. In some cases, the discussion drifts into strategies for divesting themselves from the networking business altogether. Other strategies call for pushing through full IPTV solutions with network upgrades designed to compete head-on with incumbent cable operators. Still others lie somewhere in the middle. The fundamental threat to all of these strategies, however, is that the presence of IP-based networks creates an effective distribution channel for media that the network operator has previously controlled. With that control gone, the line between creation or aggregation of content and its distribution become increasingly blurred. Why pay multiple distributors to access a channel when you have the ability to go direct? This simple question will likely drive more competition than any incumbent distribution channel.

The network operators seem to be stumbling head-on into this grey area. Attempts to compete with traditional competitors based on bandwidth, for instance, are enabling a much larger threat from unseen competitors. A case in point would be Apple's massively successful iTunes storefront, which is made entirely possible by the advent of broadband networks. As network capacity moves from 1Mbps to 10Mbps, these storefronts can move from the distribution of audio files to video files. Suddenly, the IPTV system designed to steal customers from the local cableco enables competition from another entity with far greater brand identity.

It would seem incumbent on network operators to be more intelligent in how they build out additional capacity. Rather than just building for the sake of capacity, they should focus more on who the stakeholders are in the extra capacity and on engaging in channel partnerships. There isn't a single premium Web 2.0 site out there that doesn't pay CDNs to ensure their customers get the experience they desire, and it is this direct value proposition that carriers should be considering when they plan out their future network builds. It’s no longer what the carriers can do for themselves, rather it’s what they can do for others - provided that the others help pay for the network.

Well I'll be darned

Tue, 29 Apr 2008 00:00:00 GMT

Parenting teenagers has led me to the general conclusion that this age group has come to view all things related to the internet as free and instantly available. Since this view has prevailed for many years, it is therefore logical to assume that even 20-somethings in the workforce and paying their own bills would continue to view the internet, and all things available on the internet, in that manner. Imagine my surprise when a survey of U.S. consumers showed this not to be the case.

Zeugma recently retained IDC to conduct a consumer survey to determine if (a) consumers want to be able to find, buy, and watch high-definition video delivered over the internet while sitting on their sofas using only a remote control, and (b) whether they would be willing to pay an incremental fee to the broadband provider so that they could download the videos in such a way that viewing would commence almost instantly. It probably comes as no surprise that the response to the former was a resounding “yes,” especially among the 18-34 age group (95 percent expressed some level of interest in doing this). It may also seem logical that most people would willingly part with a few dimes to enjoy a superior over-the-top video experience (56 percent said they would). But what is surprising, at least to me, is that 70 percent of the 18-34 age group indicated some level of willingness to part with hard-earned dollars to start watching the movie they just ordered right now.

Maybe the future stewardship of the business world will not one day be handed off to incapable hands after all.

Is linear television over?

Thu, 24 Apr 2008 00:00:00 GMT

I was recently at a conference where I heard Accenture claim that 85 percent of video content consumed today is pre-recorded. I guess all those PVRs are getting put to good use. Things are more dramatic when you look at the under-35 age group – that demographic is less likely to say they’re satisfied with current television options, more likely to watch content on ‘alternative devices’ (I guess that means PCs or mobile phones), and more likely to be familiar with on-demand TV. In fact, the under-35 set prefers watching content on demand and is more willing to pay to download content.

I know I watch the majority of my TV after recording it on my PVR; I rarely watch programs ‘live’ unless they are something that should be watched live, like the NHL playoffs. If I could download these programs instead of recording them, I would definitely pay for that service – but with today’s broadband rates it would often take too long. I would like to have the option of an “accelerated” download, without having to pay for the highest tier of broadband connection. For instance, if the program could be downloaded in 2 minutes instead of 15 minutes for an extra $1.00, that would be worth it to me. What do you think? I’d like to hear thoughts from others out there.