Telecom Carriers Adding to the Advertising Chaos

Implications: The traditional advertising model is changing and it is all due to digital technologies and the Internet.

Analysis: Change, especially rapid change brings chaos.  However, chaos brings opportunity.  We are today seeing a fundamental shift away from traditional advertising venues as well as advertising revenue models.

Traditional advertising venues include billboards, newspapers, magazines, television, cable TV, radio, flyers, circulars, and diner placemats.  With the advent of the Internet and a plethora of digital technologies, the traditional venues have all but gone the way of the Dodo Bird.

What we have today are digital billboards, online news services, online video streaming, HDTV, digital radio, satellite radio, and wireless telecommunications.  These are all new venues that the consumer uses, watches, or listens to.

Time shifting in the consumer viewing space has been with us since the first VCR was sold in 1970.  Time shifting has had an enormous impact on commercial television advertising.  Millions of consumers have for years fast forwarded through commercials.  Time shifting became an advertiser’s nightmare.  Thirty seven years later the commercials have had to take on the tone of entertainment itself.  Think Seth Green’s “Purple Cow” theory.  In the last few years we have had the GEICO gecko and now those funny celebrity GEICO commercials.  The television commercials are now entertainment pieces themselves.  Think the Super Bowl and the ads.

With the Internet and mobile media, getting someone’s attention for just 30 seconds is a major undertaking.  You need to get your message out faster than ever.

The wireless handset’s display screen is not exactly the biggest piece of visual real estate to work with and it is proving to be a challenge for advertisers.

One of the most significant pieces of technology to come along to transform advertising is wireless location.  Originally developed for Wireless E9-1-1, wireless location technology is now being used for location based advertising or as I like to call it “directed advertising”.  If you couple wireless location technology with that of the wireless carrier’s technical ability to link the subscriber profile with the subscriber’s handset and the handset’s location at the moment of a call, you would be able to instantly direct specific ads to the user.  The ads that are directed to the user would be based on the profile of the user/subscriber.

The real issue that this transformed media sector is facing is that ere is only so many advertising dollars out there.  According to the Yankee Group, the amount of money spent on advertising is about $5.7 Billion.  The pot of money may grow a bit year over year but not enough to continue covering both traditional advertising venues and new venues.  One of the things the media sector is facing is a shift of money from one form of media to another form of media.  This shifting of money is causing major problems for broadcast television, cable TV, printed news media, and radio.

On top of all of this change, we have to deal with the telecom carriers getting into the media space.  The confusion left by the carriers in this space is an analysis unto itself.  Suffice it to say, the carriers have no experience in advertising.  Keep in mind the carriers are not in the business of selling ads but in the business of selling minutes of use (flat rate and detail).  The point is the emerging mobile media and wired online media requires that advertising become a component of the telecom revenue stream.  See my past analyses:

“YouHoo!!! -  The Disconnect Between Social Networking and Ad Revenue”
http://news.glgroup.com/cm//Analysis/PostDetail.aspx?pid=16161

“The Writers Strike – Can Amateur Video Fill the Gap – YouTube To The Rescue?”
http://news.glgroup.com/cm//Analysis/PostDetail.aspx?pid=20216

“Online and Mobile Media – More and More People Watching – Business Are Converging”
http://news.glgroup.com/cm//Analysis/PostDetail.aspx?pid=20382

“Early Sesame Street – Adults Only; The Repurposing of Content”
http://news.glgroup.com/cm//Analysis/PostDetail.aspx?pid=19298

"Online and Mobile Media – More and More People Watching – Business Are Converging” http://news.glgroup.com/cm//Analysis/PostDetail.aspx?pid=20382


You cannot get quality content unless there is money to be made and paid.  The revenue models to support advertising and media in this new converged media space are still being developed.  The revenue models need to change and will change.  Telecom carriers have been struggling with mobile media and wired online media for the last 5 years; trying to figure out how to apply a flat rate model to a business that requires money to churn out quality material.  Carriers like Verizon cannot expect content creators to create quality content for cheap.  Subscription fees can only cover so many different content makers; you can only split that dollar so many ways.  Advertising revenue is essential for the future of this new media.

Think of it this way:

Television plus Telecom = Infotainment
Infotainment costs money = Offset by Advertising revenue plus flat rate fees