Recent developments related to the ATT / SBC merger and the details in the consent decree that was part of FCC approval for the merger shows some movement away from the pipe owners like ATT back in favor of content providers like Google in the Net Neutrality debate. A single abstention on the 5 member FCC board altered the neutrality dynamic in favor of the grass roots despite the counter argument by the pipe owners that necessary capital improvements make it imperative that they charge content providers like google and apple for all the new videos moving accross the net. Absent the changes that alter the web in the direction of cable TV, the pipe owners predict capital improvement deficits and rising broadband congestion as bittorrent and itunes tv shows and netflix movies clog the network.
Google exemplifies the enormous valuations attached to content providers who can shake the money tree of sponsored advertising as they deliver applications and content thru the pipes owned by the likes of ATT. The number of page views served directly by Google and also by partners involved in affiliate programs where ad money flows back to google is money tree. The last i saw is that the front-end revenue for google sponsored ads was averaging $1.44 per click. Google disrupted the advertising market by evolving the AdWords marketplace and by extending the equation with web browsers, adding sponsored links to the search results pages served up by google to users trying to find stuff on the web.
Rather than paying K-street lobbys and using leverage in neutrality regulations to come up with rules allowing them to loot the pockets of Google, the pipe owners like ATT ought to be surveying the web advertising markets looking for an innovation of their own in order to print money like google does. For example, instead of looking on in envy at Googles 120 billion market cap and the growth of AdSense, the Pipe owners could be saying “hey i have a money tree of my own because I own the user IP and Im positioned to add the holy grail to that IP – individual user demographics.” Good demographics, added to the activities currently incorporated into Google’s ad words market would probably double the value to advertisors. Was that search on “mortgage insurance” submitted by a 36 year old in Greenwich with income of 450K or was it submitted by an 18 year old finance student at the state university? There is a difference.
When i do a search on a google sponsored site that is using AdSense, the relative value of the Ads that i will see along with my search results is determined by an auction whose market places a value on keywords without knowing anything about my demographic. User at IP 192.0.0.1 submitted a query on “mortgage insurance”. The IP is naked. There is very little in terms of marketing demographic or segmented audience based on age, address, and income associated with that IP address.
For the sake of argument, lets just say that im that 36 year old looking for mortgage products. I have 2 teenagers who are iTunes addicted. ATT is my ISP and they have offered me an opt-in program where i divulge some sensitive personal information that i can control and that allows me or my children access to a new kind of cookie jar built on the $$$ associated with my demographic data. With the demographic, my click on a sponsored link accompanying the mortgage search is worth $3.50 not $1.44. That is because the DNA of marketers is in demographics and if they know just a little more about the person they are reaching thru AdSense rather than just the IP, they will pay.
Going with the future scenario, say that a partnership among ATT, Google , and iTunes works like this: ATT says that this month , in return for access to my demographic, they will credit my account $15 for free iTunes downloads for my kids. ATT has told Google that AdSense activity placing ads in front of me will be augmented by my demographic and as a result, Googles monthly revenue resulting from my “click” will double. Some of that delta revenue is charged back from Google by ATT. Everybody makes more. iTunes get more action that is subsidized by ATT’s bonus offer to me. So ATT is subsidizing my kids use of iTunes. ATT is collecting some piece of the AdSense money by allowing Google access to the demographic associated with my IP. Google is paying ATT a portion of the delta AdSense revenue.
references:
see “net neutrality” pg 9
technorati tags:net-neutrality, google, att, web, premiumcontent
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