With the traditional TV advertising model becoming increasingly unsustainable, advertisers are turning to the internet and mobile phone as delivery channels for their marketing and advertising campaigns.
IPTV, in particular, offers an opportunity for telcos to open up a potentially lucrative advertising revenue stream, as it provides the means with which to deliver highly targeted, localized, differentiated and interactive ads.
A handful of IPTV operators are dipping their toes into the advertising waters with trials and commercial services. NTT of Japan, for example, is offering a free video-on-demand service, dubbed 'Gyao', based entirely on advertising, with 19.9 million registered users, of which 40% are active members.
Some success
IPTV operators in Europe, such as Tiscali TV and Telecom Austria, are already piloting targeted advertising. In the US, Verizon is deploying the technical tools that will allow it to insert local ads into its programming. On that foundation, the telco plans to introduce more targeted and interactive ads in its FIOS IPTV service.
David Poole, technical director for Apac at Openwave Systems, said IPTV operators are in a better position than broadcasters and internet portals like Google and Yahoo to help advertisers address consumers' need for personalized and targeted advertising, thanks to the rich subscriber data that they hold.
'They have all this information about subscribers, and that info makes their advertising business model significant more valuable than theirs [portals'].'
The problem, he said, most broadband operators don't understand this and can't present a case to advertising agencies, and thus have missed the early online advertising gold rush, which is now dominated by the likes of Google and Yahoo.
Now they must leverage their unique advantages and start to exploit the subscriber data to develop profiles of their subscribers, including their demographic characteristics, personal attributes and preferences. Only by doing so can they create a substantial advertising market, he added.
While telcos are realizing that advertising can become an important source of revenue, there are a number of issues that need to be addressed in order to monetize this opportunity.
Geoffrey Yuen, VP of emerging technology at PCCW, said a key challenge is to put together the subscriber data that is spread across the company.
'The advertising business requires a lot of different knowledge about users, but our information is still siloed within the business, and we don't know where subscribers are, through what device they are watching TV,' Yuen told the Broadband World Forum Asia conference last month.
He said PCCW has a dedicated team to address advertising revenue, but it's still in the early stage in exploring this market.
Despite this, there is no shortage of optimism about the advertising opportunities for telcos. For one, consumers are willing to receive ads, be it via online or mobile, that are relevant to them.