Emerging Media: The Cookie Monster
Cable companies have spent years cultivating the "triple play" customer—one who subscribes to home phone, cable, and TV from the same carrier. The nascent "quadruple play"—triple play services plus mobile phone—would, in theory, simplify content licensing for both TV and mobile. Although this seems like hitting the customer convenience jackpot, a rule of thumb for subscription services is to not let that bill get too big. Consumers zero in on large bills first and start cutting the fat there before they move on to the smaller ones. That’s why you don’t see too many nickel-and-dime services crammed onto most cable companies’ bills.
Now that you can watch video content online, on your phone, on your portable media player, and even in your car, the real question is how many different subscription fees consumers can endure. Right now, you can get sports, news, and movies from your premium cable subscription through Comcast, Cox, or Time Warner. You can buy content from iTunes, use your Netflix, or unbox from Amazon on your TiVo. If you’re stuck in line or commuting, you can use your mobile phone and get on-demand and more subscription content from MobiTV on top of your Sprint, Verizon, or AT&T account.
Content owners crave incremental revenue. The prospect of developing new businesses that expand demand for their content on new platforms is exciting, but the threat of cannibalization of their existing revenue streams is also real. The oft-cited rebuttal to this is the DVD industry—many content owners feared DVDs initially, yet they became a huge market, etc., etc. Sure, but extrapolating the incremental success of VHS/DVD to mean that mobile, internet, and in-car content won’t fight for the same dollars is a very weak premise.
You may find my lack of faith disturbing, but there really is a finite amount of content that people can or will subscribe to. Part of the reason content owners cling to subscription instead of ad-supported models is habit. If you acclimate users to getting something for free, it’s that much harder to switch them to the premium "ad-free" version.
On the other hand, there are advantages to starting with advertising first. Consumers don’t want to view ads. But there’s one thing they object to even more: spending money. This is how TV in the U.S. took hold. The availability of a world of free content compelled penetration into 99% of U.S. households. Building value-added cable and, later, satellite services on top of this unmatched installed base proved not only feasible but profitable.
It’s already a foregone conclusion that online advertising has changed everything about creating ad inventory, on and off the internet. The newest channels—TV screens at the gas pump, TV screens in the taxi, plasma screens at the mall—all use internet distribution technology and two-way connections. These screens are carefully located at specific purchase-decision points, can very accurately count and guarantee impressions, and can report them back to the ad provider.
But even this high-tech digital signage lacks the most powerful weapon in the internet arsenal: cookies. Privacy concerns, along with many technology hurdles, have prevented behavioral tracking from being deployed on TVs. But new devices don’t have the baggage of TV. They start small, and can warm users up to the benefits of having their device know who they are.
It’s easy to envision what can happen once the customized nature of the web gets translated to new channels. It starts with location. Your phone asks for your zip code. Gradually, with GPS, carriers learn where you are at any time. Then they can stream some (ad-supported) video newscast relevant to the place you’ve just driven to. Most importantly, the phone remembers, "OK, this phone owner goes between these two places a lot. I bet they’d prefer JetBlue."
And that means cookies and the deep behavioral tracking and laser-precise demographic characterization that’s now prevalent online will be possible on every device that distributes content. Even television.
In a few years we will all witness the power of this fully armed and operational advertising weapon, across the entire landscape of media distribution.