Head of Practice
Nearly all players, even if less involved in FTTH/B than in other architectures, see FTTH as the end game
The first nine months of 2016 confirmed the previous year’s trend: fibre rollouts have continued apace and prove that Europe has entered the “Fibre age”! There were close to 44.3 million FTTH/B subscribers and more than 148 million FTTH/B homes passed in the 39 main European countries as of September 2016. These figures represent respective growth rates of 23% and 17% in 9 months.
Apart from Russia which represents the largest share of FTTH/B subscribers (39%), Europe’s other major markets are Spain, France and Romania, followed by Sweden, Ukraine and Turkey. Of course, the demographics of these countries and the maturity of the national FTTH/B market will have an impact on rankings in the coming years.
Thanks to the tremendous increase in coverage in 2014, Spain was once again the most dynamic market during the first 9 months of 2016, reporting 72% growth in subscriber numbers. France too was among the top markets in terms of new subscribers last year, with a growth reaching 23% – compared to an average growth rate in Europe of 19%.
The country rankings in terms of coverage are not the same, however. The average coverage rate in the EU-28 stands at 23%. Countries with the highest coverage rates are those located in Scandinavia (Sweden and Norway with 80%), Eastern Europe (Russia 96%; Bulgaria 91%) and Southern Europe (Spain and Portugal with 98%).
In terms of players involved in FTTH/B rollout projects, alternative carriers and MSOs still lead the way, representing 53% of all homes passed in the 39 main European countries as of September 2016. Their share of the total has, however, decreased since December 2011 when they represented 71% of all homes passed in the region.
The number of local authorities launching FTTH/B rollout projects in their area also decreased during the period, even if more and more are getting involved. This confirms that although their involvement is vital to ensuring exhaustive coverage, their rollouts will be confined to only the areas for which they are responsible. Their approach and strategy are of course different from private players’…
Naturally incumbent carriers are important actors in all European countries. They represent 43% of homes passed in the 39 main European countries as of September 2016, compared to 21% at the end of 2011! In previous years, we noted the growing involvement of incumbents, and today they are involved in at least small FTTH/B projects in every country in Europe. Even if some are still focused on other FTTx architectures, all consider FTTH to be the end game.
Aménagement numérique en Guinée Conakry : présentation des conclusions du SDAN par IDATE DigiWorld au Ministre des Télécoms
Directeur du Pôle Territoires Numériques
La Guinée Conakry occupe une position particulière sur la côte Atlantique de l'Afrique de l'Ouest avec six pays limitrophes (Guinée-Bissau, Sénégal, Mali, Sierra Leone, Libéria, Côte d'Ivoire), un fort potentiel hydro-électrique grâce à la présence de nombreux fleuves (Sénégal, Niger, Gambie, ...) et des ressources minières importantes comme la bauxite par exemple.
En matière de réseaux de communications électroniques, la Guinée a adopté le 13 août 2015 une loi qui doit permettre notamment une concurrence effective et un développement des investissements privés sur l’ensemble du territoire, avec l'objectif de supprimer toute barrière à l'entrée des opérateurs et de limiter au maximum les coûts de déploiement grâce à la mutualisation et au partage des infrastructures.
La Guinée bénéficie d'une situation relativement favorable en matière d'accès à la bande passante internationale via le câble ACE (entre la France et l'Afrique du Sud avec le raccordement de nombreux pays de la côté ouest de l'Afrique). Et l'Etat s'est engagé dans une politique volontariste d'aménagement numérique de son territoire, avec la mise en œuvre d'un backbone national fibres optiques de près de 4000 km, qui sera achevé fin 2017 et qui maille le territoire national avec la desserte de 76 villes. Ce backbone sera exploité et commercialisé par la SOGEB une société anonyme contrôlée à l'heure actuelle à 100% par l'Etat Guinéen mais dont le capital a vocation à être ouvert partiellement à des opérateurs privés, dans un modèle d'opérateur d'opérateurs avec un réseau neutre, activé, ouvert à tous les opérateurs de détail dans des conditions transparentes et non discriminatoires.
Le Pôle Territoires Numériques de l'IDATE réalise actuellement, avec ses partenaires LM Ingénierie et le cabinet d'avocats CMS Francis Lefebvre, le schéma directeur d'aménagement numérique (SDAN) de la Guinée et a présenté les conclusions du SDAN le 14 décembre 2016 au Ministre des Postes, des Télécommunications et de l'Economie Numérique, Monsieur Moustapha Mamy Diaby.
Le SDAN fait l'objet de préconisations déclinées en 5 axes et 23 mesures opérationnelles concrètes portant sur les évolutions réglementaires, la poursuite des investissements en complément du backbone national, le montage juridique et financier pour l'exploitation et la commercialisation du réseau d'opérateur d'opérateurs, le soutien à la demande en matière de TIC, et la mise en œuvre de formations initiales et qualifiantes dans le domaine des TIC.
En Guinée, la mise en œuvre d'un réseau d'initiative publique d'opérateur d'opérateurs, ayant vocation à accueillir des partenaires privés, neutre, activé, ouvert à tous les opérateurs dans les mêmes conditions apparaît comme la solution efficace pour l'aménagement numérique du territoire ... avec une singulière résonnance avec le "modèle français" mis en œuvre chez nous.
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CEO, IDATE DigiWorld
The question has been raised, and rightly so. The digital transformation that is expressing itself through the swift and constant stream of innovation and growing achievement (the cloud, ultrafast access, IoT, big data, AI, VR, etc.) is enthralling for many of us, but a source of deep concern for many others.
A sizeable percentage of the population on both sides of the Atlantic do not even think about it, while having become heavy consumers of all things digital, or see it simply as the inexorable eradication of jobs as robot technology takes hold. Leading economists are pondering the decrease in productivity gains, the polarisation of the labour force, the creation of a deflationist and stagnant economy. They wonder whether the “digital revolution” can still be considered a driving force behind a new economic revival and the source of wealth creation, in the same way that the steam engine and electricity once were.
We ourselves believe firmly that any desire to step back from digital progress is a dead end. On the contrary, we need to galvanise our country by investing more, as much in training, as in scientific culture, research and innovation, and of course interweaving digital technology and the transition to other sources of energy. But the argument, the push for inclusion – a byword at Davos this year – and solidarity mechanisms also need to be more widely developed and rethought.
Support from the World Bank and the OECD for reviving investments, especially in infrastructure, will no doubt raise a new series of questions in the coming months. For IDATE DigiWorld, the questions on our minds that pertain to our main areas of focus include:
. How much of a priority should be given to financing new generation ultrafast fixed (FTTH) and mobile (5G) networks?
. What is the logic behind telcos’ investments in content? And, more generally, why should telcos invest in diversifying their business?
. Which innovations (wearables, VR, digital assistants, connected cars…) could take over from the smartphone as key growth drivers?
. At what point can we expect to see a return on investment for the cloud, IoT, big data, etc. rollouts of the past several years in all of the major sectors? Could this “4th industrial revolution” be Europe’s chance to return to centre stage in the digital world?
Here then, in this first newsletter of the year, are some of the topics we have begun to contemplate with our Members, and which will undoubtedly be explored in detail as part of our various initiatives, our monthly DigiWorld Clubs in Brussels, London and Paris, the DigiWorld Future symposiums in the spring (18 May in Brussels, 23 May in London and 6 June in Paris), and of course the DigiWorld Summit, which will run from 14 to 16 November this year.
So 2017 is shaping up to be a year of lively and crucial debate!
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OTT global communication market will exceed 14.6 billion EUR by the end of 2016, and grow to 24.1 billion EUR by 2020
Director of "Digital Telco" Stream, IDATE DigiWorld contact
Representing a CAGR of 13.3%. The market is composed of three segments: VoIP (such as Skype), IP messaging (such as WhatsApp), and also a share of social networking advertising revenues.
In contrast to the telco communications market, however, the OTT communications market remains very small: since the telco communications market is estimated at 695 billion EUR for 2016, OTT accounts for only 2.1% of total value. Even by 2020, OTT will only account for 3.4%. During this time, the telco communications market is expected to see a CAGR of -0.6%.
Thus, IDATE believes that OTT communication services have not significantly adversely impacted the telcos; rather, it is a case of the telcos maintaining their market values, while OTTs are growing their market value by themselves. In fact, more influential factors, such as the economic climate, internal competition and regulations are affecting telco market values significantly more than OTTs.
For example, France was seeing intense internal competition before 2009, when Whatsapp appeared, making voice and SMS no longer a cash cow. In other countries such as Spain, SMS and mobile voice were already on the decline through the economic recession, and cheaper OTT alternatives simply accelerated the already declining telco revenues. Furthermore, Both VoIP and IP messaging are more of a paid model, and do not generate much market value, since close to 60% of OTT communication revenues come from social network advertising, which can be seen as additional value in communication.
The business OTT communication market, represented by Unified Communications (UC) and Cloud Communications - mainly Communications Platform as a Service (CPaaS) markets, is experencing a rapid growth. The CPaaS market, in particular, is estimated to take off at a CAGR of 166% for the 2015-2018 period, reaching 5.7 billion EUR in 2018. The UC market will grow steadily from 38 billion EUR in 2016 to 60 billion EUR in 2020, reperesenting a CAGR of 11.5%, driven mainly by the UCaaS model.
Still, there is a lot of interest in the VoIP and IP messaging markets, as the acquisitions and investments in this market continue in both consumer and business OTT markets. High-profile acquisitions include the acquisition of WhatsApp by Facebook, Skype by Microsoft, and Viber by Rakuten. This all forms a part of the platform strategy, whereby the aim is not to generate revenues directly from these services, but to see them as useful tools to increase user base and reach, which in turn can be used for monetisation through different means (e.g., advertising, paid games and commerce).
The likes of WeChat and LINE are successful in terms of revenue generation, followed by Facebook Messenger embracing the same platform strategy. Similarly, the acquistion of Tropo by Cisco and of Nexmo by Vonage highlights the platform ambitions of traditional UC players'. With the increasing importance of the CPaaS sector, the likes of Cisco are offering toolkits (APIs, SDKs) to clients, allowing them to develop their own communication functionalities. Meanwhile, leveraging the relationship with telcos, players such as Cisco and Microsoft can offer consolidated OTT and PSTN communication within one single brand.
IDATE DigiWorld sees five main telco strategies in response to the rise of OTT communication services: blocking, bundling, partnerships, telco-OTT and RCS. Blocking is now rare, as it can lead to churn and also arouses debates about net neutrality. Bundling unlimited and/or abundant voice and SMS is a highly useful strategy, lessening the price advantage of OTTs. Partnerships with OTTs can be a useful differentiation strategy, to be used as a driver for data plan subscriptions. Telco-OTT sees the telcos (e.g., Telefónica and Orange) offering their own OTT communication service, combining their own unique telco strengths, rather than being simple OTT copycats. More WebRTC capabilities are also increasingly being offered by telcos. Finally, RCS is a GSMA-led initiative designed to bring OTT-like capabilities to mobile devices. However, in the light of the struggle of the first RCS attempt with the "Joyn" brand, in 2016 telcos began to cooperate with Google to address interoperability and fragmentation issues of RCS across networks and Android devices. Many telcos have thus completely shifted to VoLTE deployment after years of staggering with their RCS initiatives: the "big four" (Deutsche Telekom, Telefónica, Vodafone, Orange), initially in support of "Joyn", are all moving to VoLTE deployment, and US telcos (T-Mobile, AT&T, Sprint and Verizon) have successively tested and launched VoLTE servicessince 2014.
To delve deeper into OTT communication services, check out our latest market report
Florence Le Borgne,
Head of the TV & Digital Content Practice, IDATE DigiWorld
The creation of a pan-European alliance in mid-January between three major commercial TV companies – ProSiebenSat.1, TF1 and Mediaset – around OTT video specialist, Studio71, is a strong indication of veteran players’ new strategies, built on international partnerships and digital diversification.
Traditional TV networks are having to contend with a whole new landscape: one where the competition, the screens and even the consumers have changed, and where longstanding business models are now being threatened. They have no choice but to evolve as well, to hold their own amidst this groundswell.
Every major media company has therefore developed – either voluntarily or in reaction to competition – an OTT strategy that typically includes distribution online, on mobile devices and on televisions via connected devices.
Approaches nevertheless vary from player to player.
• All now offer catch-up TV services, which may include the ability to simulcast linear programming.
• Few offer transactional VOD services, regardless of whether they offer just their own content or broader libraries.
• There are a good number of monthly subscription VOD plans available, but this encompasses a wide range of products:
o generalist SVOD services;
o thematic SVOD services ;
o OTT versions of premium channels;
o Or paid access to simulcasts of linear over-the-air networks (with catch-up offered for free).
• Lastly, a few players are developing an OTT strategy that is built not on their usual content, but rather on creating original content that will be distributed solely online.
It is into this last category that the deal announced on 12 January falls, whereby France’s TF1 and Italy’s Mediaset have acquired, respectively, a 6.1% and 5.5% stake in Studio 71 – a subsidiary of German media company, ProSiebenSat.1, created in 2013 – worth a total of around 53 million EUR. According to the Mediaset press release, this alliance is being formed “with the aim of creating Europe's most important operator in digital talent in close synergy with generalist television”.
Distributed on the leading video sharing platforms, the content supplied by Studio71 generates more than 6 billion views a month on YouTube alone, through more than 1,200 channels, and reports 405 million registered users worldwide. For TF1, this new deal is geared to allowing the French media company to become “a benchmark online video player in France across all platforms by developing content targeted at millennials”. This generation of viewers has become a prime target for the French conglomerate which already acquired a majority share of Minute Buzz in December 2016, and is heavily focused on building up its social media presence to reach younger viewers.
Faced with the threat that Netflix and Amazon represent on the international online video scene, this European partnership will enable the three commercial TV broadcasters to go after revenue outside their traditional field of operation, by combining the strength of local brands and Studio 71’s global audience. This deal should thus enable TF1 Publicité (advertising) to shore up its ability to reach new audiences, and to consolidate its position as “France’s No. 1 content marketplace”. Similarly, Mediaset – for which this deal is the first major move from its new digital division – views this alliance and an opportunity “to maximize the distribution of Mediaset TV contents on internet and to boost synergies between TV and web.”
Another noteworthy move comes from Scandinavia’s Modern Times Group which, on 25 January, announced that it was selling its share in Czech free-to-air broadcaster, Prima, in order to finance its investments in the group’s digital transformation, starting with increasing its stake in German online game developer, InnoGames, from 21% to 51%. According to MTG President and CEO, Jørgen Madsen Lindemann, “The investment is in line with MTG’s digital strategy to invest in relevant, complementary and scalable digital content and communities. It creates a third digital entertainment vertical for MTGx alongside its eSports and MPN businesses”.
If these areas of diversification are still far from rivalling these European heavyweights’ traditional businesses, the growing number of strategic actions targeting OTT video is a clear sign that veteran TV networks are looking beyond broadcasting. Their future is inextricably bound up with the shift to OTT and building a global footprint: to continue to exist locally, they need to think globally.
To delve deeper into leading media companies’ OTT strategies, check out our latest market report
CEO, IDATE DigiWorld
2016 turned out to be a relatively mediocre year for the telecom services market in Western countries: an overall trend of stabilisation in Europe’s biggest markets, after suffering a steady decline in revenue since 2008, and an overall decrease in mobile revenue in the United States, breaking with the steady growth that AT&T and Verizon had managed to maintain up until 2015. As a result, operators in Europe are naturally sensitive to any strategic moves from the two American heavyweights, especially with respect to the content industry: what are AT&T and Verizon’s hoping for when investing in content?
• Avoid being bypassed by streaming video by moving higher up the value chain, right up to production. Because video has become the prime source of traffic on both fixed and mobile networks, operators can no longer content themselves with merely distributing other companies’ channels and programmes, especially if those companies decide to take the self-distribution route and comply with net neutrality rules. This strategy is akin to classic vertical integration.
• Behind this ultimately defensive strategy, there may also be a more aggressive aim at work: play the OTT card for all it’s worth by freeing themselves from their footprint (and the Capex required to continually expand the number of homes passed) and going after customers on every fixed/mobile Internet access network, i.e. not only customers that rely on their own pipes. Therein lies real diversification since physical connectivity becomes secondary.
• Beyond this, we have to keep AT&T and Verizon’s current situation in mind. Both are having to contend with a brutal decrease in growth which had been sustained almost singlehandedly by their mobile business for the past 10 years, while also playing second fiddle to cable in the residential fixed access market. With very few attractive prospects abroad – and up until now (under the Obama administration), antitrust bodies blocking M&A deals that would have allowed them to grow their share of the mobile market at home – while still very powerful, both operators have very good reasons for setting their sights on content as a way to maintain revenue and shareholder dividends. But here is where their paths diverge.
• Being deliberately simplistic, one Verizon executive recently explained that AT&T wanted to gain a share of today’s TV market, whereas Verizon was going after the future video market that will be fuelled by millennials… in other words, rather than acquiring very expensive assets that are likely to be rendered obsolete by new video habits, Verizon is opting to slowly build up its expertise in the data economy that will underpin video (notably growing programmatic advertising revenue). What is certain is that the amount that AT&T will spend to acquire DirecTV and (provided they get the nod from the Trump administration) Time Warner is infinitely larger than what Verizon laid out for AOL, the Huffington Post, OnCue, several other start-ups (including Vessel) and probably Yahoo! But it is still too early to say which path is the riskiest.
How does this tie in with net neutrality debates?
• The future Trump administration has done nothing to hide its radical opposition to net neutrality, up to and including reclassifying ISPs as common carriers under Title II of the Telecommunications Act. In theory, this is great new for telcos who remain hostile to the regulation put into place by the Obama administration: at the very least they can take it as given that, under the new administration, they will be able to maintain their zero rating policies on content, especially content delivered over wireless networks, such as those included in T-Mobile’s Binge On plan, Verizon’s Go90 and AT&T’s DirecTV Now products.
On these last two points, what could a repeal or relaxation of current net neutrality rules mean?
• We can posit that, if net neutrality is done away with altogether, operators are back in the driver’s seat when it comes to being bypassed by streaming services sold by channels and SVOD providers. Will this go so far as to quash any desire to invest in content themselves? Not necessarily, as exclusivity can still be a real drawing card, and useful for standing out from the competition. But the biggest operators that are able to amortise massive spending on rights acquisitions thanks to their tens of millions of subscribers, can also enter the content fray with the prospect of being less heavily challenged by broadcasters and OTT heavyweights.
• At the same time, however, doing away with net neutrality may also make playing the OTT card on third party operators’ networks more challenging…
• Finally, let us not forget the other possible effects of the new administration in Washington:
- If corporate tax rates are lowered (from 35% to 20%, or even 15%), AT&T and Verizon’s cash flow will be bolstered from 5 to more than 8 billion USD…
- Meanwhile the rigour of antitrust authorities that blocked the AT&T/Sprint and later Sprint/T-Mobile mergers is likely to become far more accommodating, and so open the way for new M&A deals;
- As a result, consolidation could turn the tide on AT&T and Verizon’s shrinking mobile businesses, and make the process of staking out a claim in the content industry a less pressing concern.
So, here at the dawn of 2017, it really does seem like almost anything could happen…
Director of Media and Digital Contents Business Unit, IDATE DigiWorld
In developed countries, the audiovisual sector is experiencing a period of relative stagnation, which will probably be long-term and therefore lead to many challenges for players in the ecosystem. Although the Internet is the major cause of disruption, there are many factors at play.
IDATE DigiWorld drew up 4 scenarios in the last report “Future TV 2025” based on the market environment evolution and the new competitive situation analysis:
Landscape market evolution
• Fundamental regulatory choices: confirmation of Net neutrality, reconciliation of obligations for linear and non-linear services, reform of regional rights allocation.
• Heterogeneous global growth: emerging markets driving growth.
• IT playing an increasing role in video distribution: 'centralisation' with the cloud, the growth of streaming, the growing role played by captured consumer data.
• Increasingly significant personalised video consumption, on-demand and multi-screen ('TV as a service').
The new competitive situation
With an increasingly influential Internet sector, through pure players quickly establishing themselves in the market, accentuating the phenomenon of disintermediation of established players.
Content is more than ever king and ownership of it is crucial, hence increased competition with exclusive premium content is sending rights prices soaring, and new financial backers of original production are emerging.
Also, the market is experiencing a period of concentration (both horizontal and vertical), driven by restructuring of the telecom operators market and the race for control of content.
In this way, new forms of monetisation are appearing in an environment where pay-TV is experiencing downward pressure due to the polarisation between premium and low-cost, the role of service bundles, the development of programmatic advertising and freemium models.
The Trend scenario: a 2,4% expected global growth per year by 2025
The Trend scenario assumes that 2010-2016 trends will continue. In this scenario, the major determining factors are stable. On-demand consumption of audiovisual services continues to grow without destabilising the linear market. The regulatory status quo maintains a local approach to markets. Finally, we see a steady rise in influence of OTT players.
This scenario corresponds to slow growth of the global market, 2.4% per year on average:
• Growth driven primarily by emerging countries
• Stagnating Western European and North American markets
• An evolving market landscape
Four scenarios forecasted
Three others scenarios have been forecasted, each is in favor the stakeholder kind in particular:
“Convergence” scenario: In the Convergence scenario, TV-Internet-telecom bundled offerings predominate. They enable better prices to be offered and provide a complete range of linear TV and on-demand services, as well as music and games services. Multiscreen consumption, fixed and mobile, is pushed by one (or many) of the operators, providing permanent connectivity to the range of services.
“Disruption” scenario: Personalised video consumption predominates in the Disruption scenario, with more uniform consumer tastes on a global scale. The barriers to worldwide content distribution have collapsed, along with local content regulations. Global players controlling content rights have appeared. The leading Internet players (e-commerce, viral platforms and social networks) play a central role, offering a blend of premium and professional UGC content. The value of the market is under pressure within an oligopolistic OTT video sector on a global scale.
“Syndication” scenario: The Syndication scenario is the most cooperative and most favourable to the TV sector. Similar to how local television stations are affiliated with national 'networks' in the United States, television companies could become affiliated with large national and regional 'entertainment operators', relying on the common core of content they provide, and providing market expertise, relationships to national advertisers, local programming, and their brands and customers in exchange. This transformation takes place in both the broadcast and OTT sectors.
Discover the perspectives, key trends, and scenarios about the TV market through our dedicated report
"The Changing Landscape of Advertising : from traditional to digital"
DigiWorld Economic Journal n°104
Interview with Tim SCHUMACHER
Chairman & Co-Founder, Eyeo GmbH
Conducted by Florence LE BORGNE - BACHSCHMIDT, IDATE DigiWorld
DW Economic Journal: Eyeo GmbH is the owner and operator of "Adblock Plus", the leading open source software which allows users to block or filter the ads they accept to see, with more than 500 million downloads since 2006. Beyond that, Eyeo aims at making the Internet better for all parties, by encouraging true innovation and non-intrusive ad standards and a better user experience. Could you provide an overview on Eyeo's project?
Tim SCHUMACHER: Eyeo's mission is to empower users for a free web. To do that we offer a wide range of products and services that keep the power with the user and create fair compensation for content creators. For instance, as part of Adblock Plus, we offer Acceptable Ads, which is our compromise to better, more user-friendly ads. We help advertisers and publishers to integrate Acceptable Ads into their websites. In September we launched a new way for medium-sized publishers to whitelist ads more efficiently.
We are also working on an independent Acceptable Ads committee which is planned to be in office early 2017. The committee is going to consist of representatives from different interest groups within online advertising, such as members of the ads industry, nonprofit and consumer groups, and also thought leaders. By making Acceptable Ads independent, we have already been able to spread our vision of granular, nuanced ad blocking to other ad blockers who have adopted it.
We are also going to launch a stable version Flattr Plus shortly which is at the moment in beta test. Flattr Plus is a service through which users can easily reward the content they like. We believe that some users are eager to pay a small amount to support their favourite websites, articles or videos.
The joint vision of our projects is to empower users' rights, while protecting and improving the ability to make money for content creators.
The great paradox of online advertising is that without Internet ads, there is barely any free online content. To what extent do you feel that the general mass understands this paradox, and what is your stance on spreading this knowledge to the users?
Most users agree on the fact that pop-ups, autoplay videos and blinking banners are intrusive. So what can advertisers do to make their ads acceptable for users? Adblock Plus started as a hobby project in 2006 that blocked all ads, but as downloads skyrocketed Adblock Plus wanted to create a more sustainable approach. In 2011 we developed the Acceptable Ads initiative, a novel approach that empowers users while keeping the Internet free. We established Acceptable Ads because we don't believe complete ad blocking is the right way. The web needs advertising, and the purpose of the initiative is to find advertising formats that even ad-blocking users will accept.
In the course of our research we asked thousands of users, we talked to advertisers and created the Acceptable Ads criteria, which users can either activate or deactivate in their extension. Most users actually don't deactivate Acceptable Ads, because they are aware of the fact that advertisements on the web keep their content free.
At a period when the use of big data is key for understanding the consumer, Eyeo also proposes tools enabling users to decide which company they share data with. Various surveys suggest that users (especially the younger generation) are willing to accept some advertising (and thus share their data) in exchange for online contents, as long as these ads are not intrusive and/or annoying. Does the analysis of your software tools users back up such survey suggestions?
We do not collect our users' data, thus we don't have any behavioural data of our users.
We have done a lot of research though, for example a big research with HubSpot. There we found out that 83% of users agree it's just the obnoxious ads they want to avoid, 77% want to filter rather than block.
In September 2016 you announced the Acceptable Ads Platform, which in a nutshell shows users advertising which has been "deemed acceptable", irrespective of installation of Adblock Plus. How do you manage to convince websites' publishers, ad networks and advertisers to join this platform? What guarantee do they have that they will not lose ad revenue or that their ads will actually be seen by users?
The Acceptable Ads platform is for publishers and website owners to easily integrate Acceptable Ads into their pages with just a single tag. Users that have activated Acceptable Ads in their extension will then see these ads. Please note that all other users see the ads the website owner initially integrated, and that this is merely a technically easier way to join the Acceptable Ads initiative – under which the exact same criteria still apply. We have talked to many publishers and advertisers and most are on the user's side, willing to make better ads. As the whole procedure is scalable publishers can only gain revenue with our solution.
In fact, in just 24 hours over 1,000 publishers signed up for it, so we are eager to start beta-testing this new implementation of the pre-existing Acceptable Ads initiative.
Staying on the subject of acceptable ads, what is "acceptable" will likely be different from user to user. How then, can advertisers provide better user experience and higher revenue for publishers? Will the next step be to pay users for accepting to share their data or to see ads?
I don't think users will have to start sharing their data. The next step in finding what "acceptable" is for more people and improving the entire programme in Acceptable Ads Committee. This committee will determine what is acceptable and what is not at the end of this year, and several user groups (nonprofit groups, academics, user agents) will sit on it. So I think we've got that covered.
Otherwise, what we've found is that most users are willing to accept ads which make use of certain criteria, like those we deemed acceptable. These criteria rely on size, placement and labelling regulations.
Apart from these criteria we believe that ads have to be respectable and well integrated into the content. Publishers do not have to collect user data in order to accomplish this task. The key is to make ads that add value for the user.
Over the past few years, uptake of ad blocking on the mobile seems to have grown sharply (as opposed to the fixed). Could you shed any light on why the mobile has suddenly become the mainstream for ad blocking?
I would not call mobile ad blocking mainstream just yet, but it's gaining popularity. The main reason for the increasing popularity is for example intrusiveness of ads, which is especially annoying on the smaller display of mobile devices. Other reasons are saving data; reducing page load speeds; privacy and security. While recent reports claim there are massive numbers of mobile ad-blocking users in Asia, putting the grand total at 419 million worldwide (!) North American and European users do not block ads on their phones in significant numbers. I think this will change in 2017 as people discover ad blocking browsers on their phones and tablets.
In the "big picture" of digital advertising, the giants Google and Facebook dominate the market. How much of an influence do these players have on ad blocking, and what expectations do you have on them going forwards?
Historically, both Google and Facebook have actually been very thoughtful and careful about user experience, one of the key factors which made them strong. Google's founder Larry PAGE for example just recently said as part of an analyst call "Part of it is the industry needs to do better at producing ads that are less annoying and that are quicker to load, and all those things. And I think we need to do a better job of that as an industry.", and we fully agree.
Facebook on the other hand has made some recent strange moves when it announced that it would start trying to circumvent users with ad-blocking software and show them ads. This is an unfortunate move, because it takes a dark path against user choice. But it's also no reason to overreact: cat-and-mouse games in tech have been around as long as spammers have tried to circumvent spam filters. In the long run, we have some trust in Facebook to at some point put the user first again, and stop behaviours like that.
More generally, how do you see the future prospects of digital advertising? Eyeo is fighting against annoying and low quality ads, but do you have the impression that the weight of ad blockers now pushes the ad agencies to be really more innovative? Have you identified any interesting, catchy new formats?
Absolutely! All the recent initiatives, for example IAB's "LEAN Ads" initiative or the "Coalition for Better Ads" which just recently formed at DMEXCO conference and includes many of the best and biggest advertisers and publishers in the world. None of this would have happened if users hadn't ‘voted with their mice' and told corporations that they were fed up with annoying advertising online. So as much as we're proud of helping with this, we really have to thank our users.
Tim SCHUMACHER co-founded and was the longtime CEO of the publicly traded company Sedo AG (sedo.com), which currently has revenues of 130m Euros per year and maintains approximately 350 employees. Since 2012 he has dedicated his professional career to the German start-up scene, acting both as business angel and mentor for young companies with economic potential. His current start-ups, among others, are Eyeo/Adblock Plus, Aklamio, Stuffle and Ecosia.
CEO, IDATE DigiWorld
Provided Q4 results confirm the trend, this would be the first time since 2008 that the market is on an upwards swing.
According to the recent ETNO-IDATE report, the telecom services market in Europe (EU-28) is stabilising, and even enjoying a slight uptick in Europe as a whole. Whereas the North American market has been enjoying steady growth over the past decade and Europe has been on a downwards slide, the situation has flipped – with market growth on the other side of the pond hovering around 0%, combining a close to 1% decrease in the mobile market during the first three quarters and very slight growth in the fixed market thanks to cable companies.
Annual telecom services revenue growth (ETNO, % )
In this rather sombre situation in Western markets, despite the remarkable success with 4G customers, monetising mobile access appears to be wavering between two main options.
- After an initial period where unmetered plans became the norm, using the argument of network congestion operators began selling plans that were tiered based on data caps. The common practice was to encourage customers who were using their smartphones and tablets more and more to upgrade to a larger allowance, while decreasing the price per Gb of data. But fierce competition makes it hard to escape a deflationary trend, particularly in markets where quality metrics do not appear to play a decisive role in differentiating operators.
- We thus saw operators turn to supplying content services, and applying zero rating, either through agreements with third party suppliers (Vodafone, T-Mobile) or with their own content (AT&T, Verizon). If the content is attractive enough, it can set an operator apart from the competition.
Some, however, see the zero rating trend as grounds for reviving the net neutrality debate. So what’s the problem? While it is clearly a good thing for consumers, the opponents of zero rating argue the following. If the service provider has paid the operator, we can expect to see a decline in diversity and innovation in the applications sector that benefits market heavyweights, which are able to finance their access to the market. If the service provider belongs to the operator (or is controlled by it), there can be discrimination if only that service benefits from zero rating. The problem is that there is a disagreement over whether these two suppositions are well founded, and require specific ex ante regulation, and especially whether they fall under the scope of net neutrality. The government of India forbade Facebook from offering a set of basic applications (including its social network) for free to the country’s mobile operators. Despite having been behind the Open Internet Order, which reclassifies ISPs as common carriers as defined by Title II of the Telecommunications Act, FCC Chairman Wheeler has been very circumspect about zero rating up to now, believing that the trend needs to be observed for a period of time before drawing any conclusions. Of course, the incoming Trump administration will shake up the FCC, and everyone expects the Open Internet Order to be challenged.
Director of Studies, "Telecom Strategies" Business Unit, IDATE DigiWorld
Customer experience draws primarily on customers’ network usage and their perceived quality, as well as their interaction with the telco’s different services (sales, support and administrative), whatever the communication channel.
Customer Experience Management, or CEM, is the term used for the programmes implemented to improve customer experience.
A complex but essential undertaking
In what is now a saturated market, it is essential that operators pay heed to customer experience if they are to retain the loyalty of their subscribers. Yet telcos have fallen behind their counterparts in other sectors, particularly OTT players.
A sophisticated CEM strategy relies on the consolidation of all customer information, not just subscription data and historical contact with the operator, but also network usage, geolocation and even comments posted on forums. Such a complex undertaking is far from being implemented by telcos, who sometimes struggle to reconcile their mixed and mobile databases. Verizon is a typical example of a company with organisational silos, whose fixed and mobile operations are two clearly separate entities.
Customer experience also implies a change in corporate culture, with each employee is required to serve the customer. This implies a sizable managerial undertaking and the involvement of senior management is therefore essential.
Customer experience incorporates increasingly cutting-edge technologies
The digitisation of communication channels is gathering momentum, including stores (interactive kiosks, click & collect services) and call centres (agents communicating with customers via chats or messaging).
In order to minimise their costs, operators are installing increasingly intelligent automated solutions. Websites host virtual agents based on artificial intelligence, while call centres use interactive voice servers with speech recognition technology. Telcos can also draw on the technological tools developed by the Internet giants: data analytics, predictive analytics, profiling, event processing and biometric authentication, as well as artificial intelligence, chatbots, machine learning and even blockchain.
Yet the human aspect remains an essential, differentiating factor
Websites offer chat options and social networks are developing in this area. User forums provide an ideal intermediate solution, offering the human aspect but less costly.
Faced with competition from low-cost operators, the big telcos are taking their stores more upmarket with a focus on customer experience, in an effort to enhance customer loyalty and expand the range of subscriber services, particularly connected objects.
Opportunities for innovation: social media, mobile and personalised services
Social networks also represent a new means of communication between operator and subscriber. They offer a wealth of information that can be used to match the best message and solution to each individual customer.
While telcos are clearly aware that mobile is an essential link between operator and subscriber, the applications rolled out so far are seeing only limited success. Mobile represents a considerable opportunity in terms of innovation for telcos, who can combine usage and geolocation data to offer solutions that are both personalised and contextual, and even to position themselves as trusted third parties.
The key challenge of CEM is to incorporate data from customers’ various interactions with the operator and their social networks. Operators can use analytics tools to offer personalised solutions to customers, anticipating and meeting their needs as they gradually wind down the traditional communication channels (which are more costly). In particular, the fine-tuning of contextual solutions based on usage (Vodafone targeting subscribers going skiing abroad, for example) is still a relatively untapped growth outlet.
This process could also be used for other ends: optimising network deployment by closely analysing network usage or evaluating customer experience data (incorporating geolocation data in particular), which could then be sold to third parties.
Delve deeper about Telecom Customer Experience Management with the following IDATE DigiWorld market report