The Coming Battle Over Who Gets to Keep Wireless Advertising Revenue

Oh! We're sorry. You thought this had already been decided. Those ads on Google or Facebook or wherever just make those big tech companies richer and everyone else can go suck eggs. Or re-imagine their digital strategy. Or however anyone dependent on this revenue stream wants to position it for their clients, bosses and investors.

Um, but this is tech. Where up becomes down, the first shall be last and the hunter can become the hunted faster than you can say disintermediation.  

Call it Net Neutrality Part Deux. The techs like to think that they own 'this space.' But it turns out that some other people have different ideas. The telcos, those big, boring companies that just happen to own the pipes, wires and airwaves through which all that content flows have begun to notice how much of it is going to ad support. And, because this is the capitalist system, they are now demanding a cut.

Although lawyers everywhere are high-fiving in the halls, the tech companies are decidedly nervous about what this may imply. Chances are a deal will eventually be struck, which means that no matter what the terms, they get less. Advertisers may have to pay more, since their ability to take their business elsewhere is is rather limited by the absence of viable alternatives.

The more interesting question may be, however, whether this finally inspires those who actually provide much of the data on which the ad spending is based - that being the simple consumer who provides all that personal information for free - may finally recognize that if everyone else is sticking their hands out and getting their palms slapped with some cash, why shouldn't they do so as well? JL

Christopher Mims reports in the Wall Street Journal:

The fresh battleground? The billions of dollars in revenue generated by advertising on content and services delivered over wireless networks. Since the wireless infrastructure is owned by the carriers, the telecom companies want a cut.

If you think the fight over net neutrality is only about content, here’s fresh evidence it could be about a lot more: Executives at an Israeli tech startup believe that some wireless carriers around the world are prepared to use the company’s technology to open a new front against Internet firms such as Google,  GOOGL in Your Value Your Change Short position Facebook  FB in Your Value Your Change Short position and Twitter.  TWTR in Your Value Your Change Short position

The fresh battleground? The billions of dollars in revenue generated by advertising on content and services delivered over wireless networks. Since the wireless infrastructure is owned by the carriers, Ron Porat and Roi Carthy of Shine Technologies say, the telecom companies want and deserve a cut.

It’s an audacious idea. Some Web giants already pay Internet service providers such as Verizon  VZ in Your Value Your Change Short position and Comcast  CMCSA in Your Value Your Change Short position to deliver their traffic to end users faster, an arrangement called peering. To make this work, Internet companies pay by the amount of speed provided.

Mr. Carthy, who is chief marketing officer at Shine, is offering wireless carriers something different: In the world made possible by Shine, one kind of content—advertising—would be treated differently than other kinds of data.

A year ago Shine unveiled antivirus software based on “real-time threat detection.” Since then the company has pivoted—massively. As the Shine team talked to carriers, it realized that the carriers had concerns more pressing than malware and viruses. Some of the same technology Shine had developed to track what’s going wrong on mobile devices could be re-purposed to determine how much ad providers are making on advertising using the carriers’ delivery systems.

So now, Shine is about to unveil a technology called AdSight, which would allow wireless carriers to monitor what ads are being delivered through their networks, and from whom, all the way down to the level of individual ad impressions. The same technology would also allow the carriers to selectively block ads from any source on Web pages, in videos, even in apps.

“You should see the faces of the CEOs seeing these reports on how much of their traffic is used by ad tech,” says Mr. Porat, CEO of Shine. “They say, ‘No, this is not a real number, it can’t be.’ And then they say, ‘What can I do with that?’”

In the coming months, Mr. Carthy claims, some of his customers—which, he says, include wireless carriers in Europe, South America, Asia and the U.S.—plan to use the technology to block certain ads as a way to bring the ad providers to the negotiating table to win a cut of the fees.

The ad blackouts will come “without warning,” says Mr. Carthy.

It’s hard to verify this claim, and there is no hard evidence that U.S. carriers are involved, though Mr. Carthy says at least one is participating. Verizon, AT&T, Sprint and T-Mobile didn’t respond to requests for comment.

“We don’t manipulate content,” said Lowell McAdam, CEO of Verizon, at a conference at Goldman Sachs in September. “ Tom Wheeler [head of the FCC] has said that probably some of those principles should apply to wireless. I don’t have any problem with that…. We make money when people use the network, so manipulating that is not in our best interest.”

But one person familiar with the matter told me that some carriers in Europe will begin blocking some ads.

Experts I talked to about this plan, including advocates for net neutrality and insiders at the companies being targeted, thought it was, and I’m paraphrasing here, insane.

The risk is that, rather than starting a war with Internet giants, telcos would end up battling regulators, who in both the U.S. and Europe have demonstrated a willingness to come down hard on any provider of bandwidth that interferes with the traffic flowing across its network.

But Mr. Carthy insists that the fine-grained control that AdSight provides over which ads could be delivered to which users is legal. What’s key is that, depending on the country, users will either be given the option to opt in to the system or to opt out once they’ve been automatically enrolled. Once users have given their permission, carriers can block as many or as few ads as they see fit.

Advocates for net neutrality aren’t amused by what Shine is proposing. Josh Levy of Access Now, a nonprofit devoted to preserving net neutrality, says that blocking content, even ads, is a direct violation of the principle of net neutrality. (The rules governing net neutrality are currently under review in Washington.)

In Europe the rules seem to be clear that Internet service providers cannot discriminate among the kinds of traffic they’re carrying, but since AdSight has an opt-in or opt-out provision, it’s possible Shine’s clients have found a legal work-around, for now.

I asked Ron Porat, the CEO of Shine, whether blocking ads and then demanding a cut of the revenue made on them wouldn’t be taking Internet companies hostage. “Everyone is taken hostage already,” he responded, “You as the user are taken hostage, because some of your data is taken for ad tech.”

I reached out to Facebook, Google, Twitter and the FCC about all this, and none responded. Later this week Shine will disclose more of its plans and perhaps its partners. I suspect this is but the first shot in what has already been a long-smoldering conflict.