Recent news reveals that global telecom providers may “bomb” the mobile ad space by blocking ads on phone networks, in order to get a share of the Internet advertising cookie. The telecom providers believe that since they have paid for the infrastructure they are entitled to some of the profits reaped from mobile ads.
Never mind the CPM
Mobile ads are on the rise, no doubt. Across all channels we are seeing 50%+ mobile market share. The problem with mobile users is that they are generally a lot worse customers. E-commerce sites generally experience a significantly lower conversion rate from mobile users than desktop users and mobile ads are more often than not worth a fraction of desktop ads.
If telecom providers are going to demand a share of the smaller pie, well, we are going to see some very unhappy shareholders at Google and Facebook. Though I would argue that Facebook would suffer less than Google as most of Facebook ads are on facebook.com or their app, on an https connection. Unless the telcos plan to issue MITM prone certs, I don’t see how they will easily be able to extort ad money from Facebook.
Google has a significant portion of ads from off-site ads via their Adsense programme. These are the likely target for the bomb. I don’t doubt that Google with their technological prowess could work around this block but they may not want to play cat and mouse with global telcos who could, in a fit of anger, throttle mobile visitors to bandwidth heavy Google properties like YouTube.
What will happen?
If the big telecom providers decide to launch the bomb I suspect that we will see a string of lawsuits, probably anti-trust and net neutrality related. Even if the advertisers don’t bend to the demands for revenue sharing, the lawsuits will cost time and money for all parties.
With text messages decreasing rapidly and mobile data becoming ever cheaper, at least in Sweden, the telcos are feeling the pressure. It used to be the case that buying a phone off a telco was more expensive in the long run but these days it tends to be cheaper than buying the phones straight off, say Apple. Data is also way more expensive than texts for the telcos and this means that their margins are shrinking quite rapidly. We should expect more schemes like this in the future as margins and stable revenue shrinks.
It is unlikely that this scheme will succeed in the long run as the technical prowess of the big advertisers are like to be enough to work around the majority of blocking attempts like this but telecoms providers double-dipping may well be the future as shareholders demand growth in a soon to be saturated market.
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