Telcos need to find ways to re-coup capital investments made in deploying 5G networks. And ad tech is by far the most convenient monetization opportunity for telcos and operators.
The Whole New Way of Looking at Ad Tech: How InMobi Defines It for Telcos
Operators have always looked at the underlined connectivity and monetized it on a cost-per-byte basis. Every byte of information that lives through this channel, which telcos have to build out, gets monetized by someone – just not historically by the telcos themselves.
Every single byte of information residing in this telco infrastructure is worth tons of interest to someone. Telcos are in a position to be the data marketplace, thereby connecting the buyers and sellers. They should fully participate in today’s digital economy and not only be the underlying network infrastructure underpinning it.
What Value Gets Created?
Value gets created when this engaging demand is steered by a telco to the right supplier in the most privacy-compliant environment to enable a frictionless transaction, thereby addressing the demand. Today, the walled gardens have been doing this like nobody’s business and kept the revenue share deliberately away from the telcos. But now, with the open environment of inventories available on telco devices, it is time telcos gain their share of dollars by creating this value, using InMobi’s well-oiled engine.
Another aspect to note is that, during the initial rollout of 4G, it was OTT players like Netflix who made the biggest inroads with users, while operators were only network providers at the end of the day. Only time will tell if there’s a different strategy that operators can deploy as they roll out their 5G networks.
Challenges Telcos Face in their Monetization Journey
There will be significant challenges that telcos face should they seek to build out a robust advertising monetization unit. Largely, there are four challenges operators face:
From a privacy standpoint, it can be difficult for them to build out an effective ad tech solution that has user privacy built into it.
The digital ecosystem (outside of telcos) has always been advertiser focused. All SLAs and KPIs were structured around advertiser requirements. Telcos metrics, however, are more consumer focused. Squaring these differences is no small feat.
The technology itself presents challenges too. In the programmatic ad tech space, the demand side platforms, supply side platforms and even the exchanges own the platform. Whereas for the telcos, it is always a question whether to build this or outsource the platform, as there are pros and cons that follow each choice.
Setting up the right operating model or business model that is needed to run an ads-focused monetization business. The right mindset is also key to make the best out of 5G data monetization.
How Does Monetization as a Metric Differ in Different Markets?
There is a tremendous delta observed in different markets. Let’s take the U.S. and Canada compared to India and Indonesia.
The device to ARPU (average revenue per user) ratio is a key metric we believe in, to understand what solutions would work in a particular market. The challenge for telcos isn’t in creating the device surfaces, rather it’s around monetizing those surfaces.
In the U.S., we often see ARPU around $70, with a typical Android device price ranging around $400. In India or Indonesia, while devices cost around the same amount, ARPU is $4. In mature markets like the U.S., it is astonishing to see how the customer experience on device surfaces can impact telco top line numbers, highlighting the role the device plays in carriers gaining customers for a longer time.
Taking an Insider Approach to End Consumers
Here’s what it takes for a telco to become a successful ad tech player:
Have a tech startup mindset and be ready for an operating model mind shift.
Need to expand their right to play and develop tech capabilities which are secure.
The ways in which they charge end users will vary in different markets.
Telcos should aim to serve as a gateway not a marketplace.
While there are a handful of operators that have embarked upon the journey towards ad tech monetization, yet there is a long way to go for most telcos.
For an in-depth look at the current state of telco monetization, ad tech and 5G, be sure to check out this recording of our Fierce Wireless webinar with McKinsey.