The IP Development Network Blog

Would you sell your identity? Probably not if that meant people peering through your windows or being followed by CCTV everywhere you went, but I am not talking about Orwell's 1984...

I am interested in your identity because it is a hugely valuable reference point for advertisers that want to talk to you. The more they know about you, the more refined they can make their message to match your requirements, the more likely you are to buy their goods. Facebook for one, are already trying to exploit the opportunity.

Splattercast Advertising
In traditional media marketeers simply do not know who they are talking to or whether the intended audience is even tuned in to the adverts they place. This is particularly a problem for TV where the demographic refinement is severely limited. At best, they know the TV region and the programme playing at a given time, so they have to be general in their messaging and hope that the right people tune in to the show.

Some programmes are targeted at niches broad enough to help advertisers - football and beer immediately spring to mind - so Carlsberg for example, can talk to its potential audience in quite a specific way already.

It gets better in this example because the customer can actually be encouraged to consume the product there and then. Of course this works for other brands too whose products may also be in the fridge, but the bet is that next time you buy beer, you think Carlsberg.

Advertising Wastage
But even in this example, there is wastage - and I'm not referring to the dregs that some people always seem to leave in the can. There is a subset of the market that Boddingtons would like to reach and would be prepared to spend more to do so than Carlsberg. Carlsberg could get more bang for their buck too by being more specific with who they talk to. Shandy drinking southerners probably.

There are many sub niches within a broad market as this example shows, however badly. Targeting each of these niches individually, it is likely the sum of the parts is will be much greater than the whole. If brokers can break down the audience into its constituent niches and manage the growth in scope, they can charge advertisers more per viewer per hour.

IPTV Business Model Required
IPTV is the perfect platform for targeted advertising because of the ability to individually target consumption, but there is a business model problem facing the internet. Whichever way you look at it, there is investment required to grow the networks to cope with online entertainment and revenues are not growing to pay the bill.

This new money has to come from you - in the end only the consumer can pay. But this new money need not come directly in the form of a bigger broadband bill: advertising is one of a few examples of alternative approaches. This one needs your consent, but if it saved you £30 a month would you sell your identity to your ISP?

Why the ISP? Because they are the guardians of your internet identity. They have the missing link - they know both the postcode and the IP address of an individual user.

The Missing Link
When an internet content request is received, the website owner knows your IP address, can tell which pages you visited, links you clicked, how long you spent on a page but in terms of who you are, they can determine the network you are on and the country you are in but very little else. MaxMind for example, specialise in the geo-IP field and I use them some of my P2P geo-location analysis. The best they can do though when given my IP address is to say that I am a Zen Internet customer somewhere in the UK.

Of course Google add to this by building up a profile of you through your browsing history, search data and RSS feeds (if you use Google Reader). The problem here is that your internet habits often miss where you spend the majority of your money - on FMCG commodities - where brand and perception are the only real differentiators and where advertising plays the biggest role.

Hands up if you have seen a TV advert suggesting where to buy groceries. Keep your hands up if you have done a Google search for the best grocery store near you. My point is that internet searches are for unusual products, whereas advertising deals most with commodities.

If the advertiser can interrogate the ISP to determine the postcode to match a user's IP address they suddenly have the opportunity to really target adverts for these FMCG goods. They could serve back a set of adverts, specifically to that user for brands and products that are most likely to appeal. You win because you get the ads and the products you want. The advertiser wins for the same reason and the ad broker wins because he can charge more.

The Value of TV Ads
ITV in 2006 reported £1.28bn in advertising revenues. BARB viewing stats can be worked backwards to arrive at approximately 6.5bn viewer hours per year on ITV. Divide one by the other and you can see that ITV gets 20p per viewer per hour in ad revenues.

In the same period, Sky reported £342m ad revenues for approximately 2.1bn viewer hours. This gives a slightly lower figure for Sky of 16p per viewer per hour. Sky gets subscriptions on top of that of course. These are ballpark figures but it is a benchmark nonetheless.

Per household and excluding the BBC, you have around 17 hours of TV viewing per week. At 20p per hour that works out at around £14.50 per household per month.

New Advertising Revenues to Build Networks?
Just supposing that this works and targeting doubles the advertising spend by a given point in time. Assume the ISPs keep half the benefit for their contribution (£7.25 per month) and within 18 years you have more than £25bn NPV of accumulated value to the network industry. Enough to fibre every home in the UK, not just 90% of them...

In all likelihood, investors will look for a much faster return. At £14.50 per month extra to the networks, the £25bn NPV figure is hit in seven years. This is probably acceptable for an asset with an expected 10 year shelf-life before it too will require a further, if perhaps slightly less costly upgrade. To generate £14.50 extra per month for the networks, the effectiveness of adverts needs to triple as a result of the new capabilities. Is this possible?

The opportunity for advertisers increases dramatically because of the interactive rich media capabilities but in order to exploit the opportunity to target you, they need to know who you are. The technology is probably well capable of delivering on this promise, but are we prepared as individuals to sell our identities?

In Part II, we will be looking in more detail at what personalised adverts mean and some of the arguments against this as a means to fund the underlying networks.

Labels: IPTV advertising, targeted ads

# posted by Jeremy Penston @ 9/06/2007 09:35:00 AM

Thursday, 6 September 2007

How Much is Your Identity Worth?