Amid all the dramatic change taking place in online marketing, one issue you probably have never heard of may end up having the widest effects: “zero-rated services.” Today, all the major mobile providers offer a product under the umbrella of zero-rating. When taking advantage of this offering, data usage is not subtracted from the users’ monthly cellular data plan, so it’s considered “free” content. T‑Mobile’s Binge On product is a good example of this, through which users can stream unlimited videos with no reduction against their data caps.
How Can Free be Bad?
To understand the concerns around zero-rating, you need to first understand its relation to net neutrality, the policy by which ISPs must enable equal access to all online content, without favoring or blocking selected content. Net Neutrality is a hot-button issue, with many consumer and technological organizations arguing passionately that preserving net neutrality is critically important. When ISPs implicitly favor free content in zero-rated products over content that is not free, they run counter to the spirit of net neutrality.
Conversely, ISPs argue that they must be allowed to establish fee-based, premium Internet “fast lanes” to meet growing infrastructure demands. Although zero-rating does not generate fees at present, it is establishing a foundation for ISPs to create revenue streams in the future – perhaps in the near future
What This Means for Marketers
Digital marketing has been an area of growth and excitement for marketers as they find new ways to reach their customers efficiently. At Analytic Partners, our ROI Genome data shows us that, while online advertising ROI typically outperforms offline, there is a trend towards the convergence between the two, across industries, as costs increase and demand outpaces inventory.
We envision that ISPs will ultimately charge a fee to content providers who are included in the zero-rated streams. These costs could lead to higher advertising costs, and the process of digital ad buying, which was already complex, will inevitably get worse.
Currently there is no broadly available data to characterize the efficacy of zero-rating and it is not clear what percentage of the market is data-plan sensitive.
If ISPs intend to create premium Internet offerings, they will need to show the independently-validated data and demographics that advertisers need to justify premium rates.
We can’t predict the future of zero-rating or how the world will look if net neutrality is revoked. But, whatever the future brings, we rely on the availability of data that we can leverage to deliver insights to our clients that are measurable, actionable, and clear.
To learn more about…
ROI Genome from Analytic Partners
The Legality of Neutrality from Vice
FCC Ends Zero-Rating Probe from the Washington Post
Zero-Rating in Europe from BEREC
Holland and India Prohibit Zero-Rating from EDRi.org
Zero-Rating and Mobile Data Usage from Nick Feamster