IndustryKiss Your Ads Goodbye: How Net Neutrality May Impact Content & Advertising
Kiss Your Ads Goodbye: How Net Neutrality May Impact Content & Advertising
Your initial instinct may be to gloss over the battle of Net Neutrality. However, proposed rules could directly impact the distribution of content, as well as the effectiveness of online advertising by businesses and brands unable to "pay to play."
One could argue that the discussion around Net Neutrality has been designed to be so boring and complex that ordinary consumers and entrepreneurs tune it out. By design? Let’s not be cynical. It is important we understand how proposed rules could impact every household, content provider and advertiser in the U.S.
Net Neutrality – Unplugged
Your initial instinct may be to gloss over the battle of Net Neutrality. However, proposed rules could directly impact the distribution of content, as well as the effectiveness of online advertising by businesses and brands unable to “pay to play.”
Internet Would No Longer Offer Level Playing Field
Net neutrality has been the topic of hot debate and discussion for years.
On May 15, the Federal Communications Commission (FCC) voted in favor of the preliminary proposal that will allow “fast lanes” on the Internet.
In realistic terms, most businesses and brands may view this as a fight for streaming video services to take on with cable television and telecom companies. Yet, the policy could impact them directly where it really counts – the bottom line.
What is Net Neutrality?
Net Neutrality implies equal access to broadband and content. Proposed rules would require that ISPs (Internet Service Providers) treat all Internet traffic – even that of competitors – equally. And, the proposed rules would prevent ISPs from blocking content.
However, the proposal set forth by FCC Chairman Tom Wheeler, a former lobbyist for cable companies, would allow ISPs to engage in “commercially reasonable” traffic management. It would allow also provide broadband providers a framework that would enable them to establish and charge for “fast lane” access to consumers.
Translation: Rather than the “level playing field” that currently exists, ISPs like Cox, Comcast (soon to include Time Warner), AT&T, and Verizon will be able to charge more for faster speeds and reliably delivery of content to customers. Large content platforms may be able to absorb or charge for premium fees. However, smaller content producers could find themselves at a distinct disadvantage. As a result, consumers will likely find themselves paying more for content across platforms.
ISPs vs Content Creators and Distributors
Proposed rules appear to place consumers and tech giants like Google, Facebook, eBay, Amazon, Netflix, etc. on the same side of a major issue.
ISPs have invested heavily in lobbying the government for the right to manage Internet traffic in the proposed two-tier system.
More than 100 tech companies have responded with a letter urging the FCC to protect users and technology companies against blocking, discrimination, and paid prioritization on fixed and mobile platforms.
Net Neutrality According to John Oliver
In today’s culture, comedy has become a highly effective method of delivery for concepts people may not be inclined to research independently. The YouTube video below by John Oliver of the HBO show “Last Week Tonight” pokes fun while quite effectively explaining Net Neutrality, from his point of view. The video has been viewed 2.3 million times. The response to his call for viewers to post comments brought the website FCC.gov down.
Warning: Offensive Language.
A day after Oliver’s video went viral, Netflix began posting the following screen holding the ISP accountable for bandwidth impact on delivery of service.
Would ISPs Actively Control Access to Content Under Net Neutrality?
It appears Comcast has already taken action to actively throttle internet bandwidth access to content providers, according to the graph published by Netflix.
Note the decline in Comcast download speed during the period of negotiation between Comcast and Netflix and the spike in February when Netflix agreed to Comcast terms to improve download times. A deal that has “all ingredients of a mob shakedown,” as Oliver put it.
He may have been joking, but his sentiment may resonate with consumers who, under the new rules, would be forced to trust the two most hated companies in the United States (Comcast and Time Warner Cable) and other ISPs with greater control over the distribution of bandwidth and ultimately the content they will be able to consume.
Milliseconds Impact the Bottom Line
There are two basic methods by which content platforms are monetized. Either a subscription fee is required to consume the content, and/or advertising is sold to offset delivery of content. Efficient delivery of that content is vital to sustainability of these platforms.
“Ad serving is so commoditized, all of a sudden [extra speed] becomes an actual competitive advantage for a company,” said Jim Caruso, a Verrick Media Management, who explained that the decision of whether to serve an ad when a browser sends a request has to occur within milliseconds.
The impact of a two-tier system would be two-fold when advertising revenue is dependent upon peak performance of the platform. The proposed tiered system of bandwidth management by the ISPs could create an unfair advantage for ISPs interested in fast-tracking advertising on their systems, while adversely impacting competitors and companies of all sizes seeking to deliver revenue-supported content.
Cost of Advertising Likely to Rise Under Proposed Net Neutrality Rules
Pennies count when it comes to paid advertising on content networks. Advertising makes it possible for websites like Search Engine Watch and countless others to publish content that is “free” for readers to consume and share.
“Pricing will go up for access from a marketing perspective in terms of CPMs,” Joe Apprendi, founder and CEO of Collective told Advertising Age, who also speculated that a multi-tiered system that forced more publishers from ads-based revenue to subscription-based models would be harmful to marketing performance.
He added that a tiered-system could “redistribute” audiences, making it more difficult to target them on TV or digital platforms.
The impact of slow connection on website abandonment and purchases is widely reported. It stands to reason that a two-tier system that allows some to reduce the time it takes for a video, content, or product to load, along with any ads supporting it, would become a competitive advantage – an advantage many content publishers, video producers and commerce platforms may not be able to afford.
The current reality is that the systems that deliver content and ads to websites and mobile devices are highly commoditized. Much of the content delivered online depends on the profitability of digital advertising – they simply can’t afford to publish “free” content otherwise. The proposed two-tier system could change that forever.
The FCC ruling will only impact how U.S. consumers consume digital content. Should a two-tier system force shift from advertising-based content delivery to subscription-based content, international audiences would also be impacted.
Where do You Stand on Net Neutrality?
On May 15 the FCC opened comments to the public for 120 days, inviting commentary on whether the commission should make any modifications to proposed rules before making a final decision later this year.
Comments on Protecting and Promoting the Open Internet can be made on the FCC Comments Page.
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