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Why Advertisers Will Survive Just Fine Without Net Neutrality (But Should Support It Anyway)

Marketers Have Some Tough Choices to Make

By Published on . 2

There's a fight taking place over the future of internet access. Marketers can't afford to sit on the sidelines.

Broadband providers and the Federal Communications Commission are battling over whether all internet traffic should be delivered equally, a principle known as "net neutrality." If net neutrality goes away -- a federal appeals court temporarily defanged the FCC's decree last week -- the cost of doing business online could skyrocket.

Broadband providers like Verizon, Comcast, AT&T and Charter Communications would be able to impose new taxes on online-content delivery, the web equivalent of express shipping charges on bandwidth-intensive service like Hulu, YouTube and Netflix. This would fundamentally hurt marketers that rely on the web to deliver rich content or commercial messages attached to video content. But it could also bring opportunity.

This glass half empty/half full divide was reflected in the results of an Ad Age poll question: Would you sponsor bandwidth to keep it free for consumers? Among 93 respondents, 44% said yes, it's a vital service and brands can play a role in providing for consumers, while 56% said no way, it sends the wrong message on net neutrality.

WHY MARKETERS WILL DO FINE WITHOUT NET NEUTRALITY
Advertisers already subsidize much of the internet's content. That said, web ads are annoying, especially incessant pre-roll ads on already-short video clips. It's a bad user experience. But what if Madison Avenue could step in and provide a service consumers would appreciate? Think: Free Hulu, brought to you by …
In a world without net neutrality, media companies could be asked to pony up more money to broadband providers to ensure sites load at normal speeds. That could siphon funds that would have gone to producing content, which could compromise quality. Alternatively, consumers could be charged fees for access to some sites. That could discourage them from consuming online content, including the ad-supported variety.
"From an advertiser's point of view, we want as many high-quality pieces of content to be delivered to consumers whenever they want under whatever circumstances they want," said GroupM Global Chief Digital Officer Rob Norman.

One problem: Consumers' tastes have grown expensive. Data-heavy content like high-definition streaming video dominates online-content consumption. Netflix and YouTube account for half of the data being delivered to people over broadband, according to broadband-service provider Sandvine.
Marketers could step in as sugardaddy.

AT&T's recently announced sponsored-data program could become the internet's new economic model. Like the ultimate home-page takeover, brands would pay for consumers to access a site. Imagine Coca-Cola subsidizing access to Hulu on days "American Idol" airs. That could lead non-ad-supported services like Netflix to embrace the option, opening up new inventory to media buyers.

"The long game of this is: If you end up with a higher proportion of all screen time available to advertisers and the [broadband providers] spend incremental revenue and reinvest in providing bandwidth so consumers have a great experience, it's a decent value exchange," said Mr. Norman.

Would advertisers be willing to shell out for that additional inventory? Mr. Norman said he believes so. "The more ad-funded programming or screen time there is, the better for advertisers," he said.

WHY THEY SHOULD SUPPORT IT ANYWAY
So advertisers should just play along with Verizon and the internet's other bandwidth overlords? Um, no. Advertisers are the internet's ultimate patrons, but brands need to wake up and remember who their real customers are and think about that when they pick sides.

Hate metered bandwidth? People are going to hate ad-supported metered bandwidth even more. Sponsored internet access may sound initially interesting to advertisers, "but it's going to come with the disclaimer that you're now supporting this new world order," said Razorfish VP-Media Julie Weitzner.
Even if advertisers were to shrug off the reputation hit, there's also the hit to their wallets. Sites like Hulu already ask Madison Avenue for money to support operational costs. If broadband providers are able to introduce new costs to video-rich websites, those sites could pass the buck to advertisers. A brand would pay not only for a pre-roll ad but the bandwidth to stream it.

Marketers would also have to take into account the price of distributing their own sites. And while creatives may love winning the internet with clever branded video, try explaining that to a CMO whose costs to distribute that video have risen dramatically. "Branded content has taken such a bigger role, and a big part of that is video. So if we think about bandwidth and some of those fees, the implications are huge," Ms. Weitzner said.

Adam Kleinberg, CEO of interactive agency Traction, said the absence of net neutrality would "inevitably" result in slower page-load times for some sites. For marketers' e-commerce properties that could be a death knell. "Just one second in load speed has dramatic impacts on e-commerce conversion rates," he said.
Then there's the future. The present discussion has centered on the web, but what about the day when everything from a person's TV to car to refrigerator is connected to the internet?

Net neutrality's outcome and advertisers' response would set a precedent for the underlying economics of "The Internet of Things."

"Getting shaken down by providers for data access is going to be something every marketer will need to consider," Mr. Kleinberg said.

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