Cable's Online Opportunity
As the cable industry turns its attention to next week's Cable Show '08, it is time for a reflective look to see how the industry can reinvent itself and continue to prosper in the rapidly changing realities of today's global business environment.
Amid the Cable Show's introduction of new products and services that will help operators compete through the next generation, there is an issue that the industry needs to address as a whole.
Cable network operations will tout many advanced service offerings such as IPTV and VOIP at this year's show, but these new services will provide operators little value if cable operators cannot find a way to offset the cost of infrastructure upgrades to meet the increasing bandwidth demands placed on their networks.
At the same time, the cable industry is losing out on a significant opportunity in the $20 billion and growing online advertising market around which Web giants like Google and Yahoo have built their businesses. Cable MSOs, with their 30 million cable lines, have enabled the success of this business model without realizing their maximum revenue potential.
This is a major disconnect. While cable companies can offer premium services such as video-on-demand, cable also enables high-speed Internet access that allows consumers and businesses to experience Web 2.0 or take advantage of software-as-a-service.
To be able to deliver the services of the next decade—the ones being addressed at the cable convention and the ones yet to be explored—the cable industry needs a larger revenue stream than what is generated by the commodity marketplace that simple “signal transport” is becoming.
Furthermore, as a major player in the overall Internet ecosystem and an enabler of the digital revolution, cable deserves a fair portion of the income that the growing online market generates.
The online advertising industry is projected to grow to over $50 billion by 2011. Even though many MSOs are eager to capitalize on the revenue opportunity, they recognize the care that must be taken with respect to maintaining consumer trust and protecting consumer privacy. So how do MSOs take advantage of this significant market opportunity without compromising the trust and privacy of their global subscriber base?
Research has shown that consumers are willing to offer some information about their buying habits in return for small rewards. The success of grocery store discount cards is a prime example. For relatively small discounts, millions of customers use these cards every day knowing that the store is recording and analyzing their purchases.
The same applies to credit card companies, banks, and airlines, to name a few. The overwhelming evidence is that public concern over consumer privacy is selective, depending on what information is collected, how it's used, and—most importantly—whether consumers are informed up front.
Fortunately, MSOs can leverage technology innovations that protect consumer privacy. Coupling this with sound privacy policies to allay these concerns, cable operators can benefit from technology that matches online consumer interests against commercial categories without recording personally identifiable information or sensitive data about consumers, to improve their subscribers' online experience with ads that are relevant to their expressed interest.
Imagine if you are surfing through various Websites researching information for your trip to Rome. Seeing generic display ads about airfare deals would not catch your eye. Even an ad for European cruise deals wouldn't be specific to your trip. Instead, technology can be intuitive enough to highlight an ad for hotel discounts in Rome, or any other promotion that would make your stay there more enjoyable.
What if you are a luxury car enthusiast looking to make a purchase in the next month? You shouldn't expect to see promotions for “minivans” or “compact” vehicles in the ads you encounter online just because you've shown interest in buying a car. Your eyeballs would only pay attention to ads and promotions with terms like “Mercedes” or “Lexus,” the terms that specifically cater to your interests.
Because of the specificity of ads, core privacy-by-design principles of such technology must ensure the anonymity of a consumer, protecting the privacy of his or her data, and excluding sensitive or personal subject matters. This concept may sound contradictory, but it is already operating successfully today. Several regional cable operators of various sizes are using these systems successfully, with very few opt-outs and few, if any, customer complaints.
Consumers feel secure knowing that sensitive personal information is not being collected, that they can opt out at any time, and that their personal identities are not collected. And they value receiving meaningful, usable information about purchase options when it is relevant to their interests.
The Internet ecosystem is powered by entities like cable companies that enable the delivery of services via the Web to the consumer. For the ecosystem to thrive, the cable companies should be entitled to more of the revenue generated from it. Is online advertising the key to transforming the cable industry? More and more MSOs believe that it may be the biggest revenue driver as we approach the next decade. The key to ensuring its success is coupling this new business opportunity with enabling privacy-by-design technologies and practices that preserve subscriber trust.