Thursday, December 19, 2013

Rise of Ad-Supported App Firms Could Have Access Provider Implications

There is a potential lesson for communications service providers in the rise of the ad-supported software company, something never seen previously. And the glimmer of significance is the notion that third parties might provide the revenue model for some communication services, at some level.

That would be a historic change from the traditional pattern, which has communications service providers making their revenue from selling services directly to end users.

Granted, it might not be unusual to argue that a smallish firm might attempt, or even succeed at, providing some communication services in exchange for agreeing to view, listen or watch some amount of advertising.

Indeed, from time to time, that has been tried, especially for use of voice services.

What is unusual, historically, is that a firm such as Google can become a giant software company based nearly exclusively on advertising support.

But Google is no longer unique. One might count Facebook and Yahoo as among technology firms supported nearly entirely by advertising support.

In recent years, there has been much talk of ways communication service providers can earn more money from third parties, such as advertisers or application providers buying some network features, to reach or better serve application provider users.

At least so far, the trend remains seminal, in some cases because regulatory bodies prohibit one or more of the business models that would make third party payments lawful. The U.S. fixed network network neutrality rules provide an example, barring Internet service providers from creating quality of service features application providers can use.

It does not seem likely that the revenue driver for an access provider would primarily become services sold to third parties and business partners, rather than business and consumer end users.

But as the experience of Google, Facebook and Yahoo suggests, indirect revenue mechanisms, which generate cash from business partners, not end users, are a new factor. The issue is the extent to which communications service pr

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