IP advertising

Cable advertising standards and programs

Cable companies’ efforts to create a uniform national ad market are moving forward even as some in the industry hope for an Obama FCC decision to permit further mergers and acquisitions. At the moment, the market share cap imposed on cable prevents further consolidation, and cable operators feel that this may be limiting cable’s potential to create a uniform ad strategy.

The “Canoe” initiative is being supplemented by the SCTE 130 ad platform standard that is likely to be the common mechanism for interactive advertising in cable from 2009 onward. The move is seen as essential in making cable TV more competitive with the Internet, but it will also likely put pressure on the telcos.

Google financials point to recession-proof market?

Google again beat Street estimates with its revenue up 31% and profit up 26%. The performance of Google in the last quarter isn’t a complete vindication of the company’s business model in bad times—things have gotten worse since then—but they are a strong indicator that Google and perhaps other online firms may beat traditional advertising and retail channels in tough economic times.  That would suggest that the Internet is becoming a necessity, something that is recession-proof, and that conclusion would have major implications for technology planning in 2009 and beyond.

Our models do show a tendency for online to continue with only small declines while more traditional channels dip more seriously. If the current quarter’s numbers show this, it will certainly have a major impact on the market, and on M&A in the online space. We note that Google’s growth is still slowing, and that the company needs to become successful beyond search ads, and very successful, to continue to dominate the field.

Spectrum auction has free wireless Internet conditions

The FCC has cleared the way for auction of spectrum that would be conditional on providing free wireless Internet service. The move has been controversial because most in the FCC believe that there is no way to make such a service work.

Other attempts at free or low-cost wireless services, such as municipal WiFi, have largely collapsed because advertising sponsorship was not forthcoming and problems in performance tarnished the image of the service. It may be that the greatest impact of the measure will be on the mobile advertising space, where current wireless operators will be looking to secure new ideas that will keep their own services on top and reduce the viability of a purely ad-sponsored approach.

Microblogging: Trouble for network bandwidth?

Twitter, the “What are you doing” less-than-texting concept, is gaining a lot of buzz, users and funding. Monetizing any social network has proved difficult, and Twitter’s simple approach makes it harder than usual to see how ads might work there, but it still raises a troubling question for networks. Is the real service of the future more signaling than bandwidth? Clearly you can’t be twittering video stuff to each other; and few people have the time for an activity that must occur regularly and also consumes a lot of capacity.

If casual social microblogging is the prototype of future services, then network bandwidth and bandwidth production could be in deep trouble. We believe that the telco side of the market needs to be thinking about how to make casual bit-intensive activities as attractive as short text messages and blogs, or face some unpleasant consequences.

Golden Google: Signs of reality?

Business Week has joined other publications and sources in noting that Google may be experiencing the signs of decay in its basic click-through ad model. Google’s stock sunk when its reported clicks dropped in January, and investors began to worry whether the Google model was recession-proof. We think that click ads have their place, but we’ve continually noted that the majority of ad spending today (which exceeds $700 billion worldwide) is directed at models that don’t translate well into clicks. This isn’t to say that online advertising could not, at some point, take over for virtually all ad fulfillment—it likely can. However, the click model isn’t going to be the way to get there by itself, and the industry needs to address the question of what kind of flexible online model will work in the long run.

Microsoft’s Yahoo bid

Microsoft has offered to buy Yahoo, a move that clearly indicates it believes Google to be a threat, and also that Google may be vulnerable. The move comes after a slower-than-expected quarterly growth rate from Google and a better-than-expected result from Yahoo (though the results didn’t help the stock). This action will clearly raise a lot of regulatory interest, but it is believed that regulators are already concerned about Google’s power in online search and advertising and might give the deal a nod. We think this is an indication that the web search and advertising market will be much more competitive in 2008 and that M&A by both parties is now more likely.