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IPTV Advertising Models Need Imagination

As deployments of Telco pay-TV services accelerate around the globe, new questions are being raised about applying the legacy metric of merely measuring viewer and service subscriber counts to determine appropriate advertising fees.

According to a Bloomberg News report, Verizon Communications Inc., the second-largest U.S. phone company, has been accused in a lawsuit of setting inflated prices for advertising -- by exaggerating the number of subscribers to its FiOS pay-TV service.

Verizon overstates subscribers by including prospective customers, not just actual ones, advertiser Digital Art Services Inc. said in a complaint to the U.S. District Court in Manhattan.

"Verizon's internal documents show, and Verizon has now admitted, that Verizon has a policy of inflating the number of its reported FiOS subscribers," Digital Art Services said in the complaint.

Apparently, Verizon and other defendants in the case told Digital Art Services executives that pending customers are included in public subscriber reports, and that it was a reasonable practice because pending customers become active customers within two weeks, according to the complaint.

"Verizon's documents flatly contradict that assertion," Digital Art contends in the complaint. "The number of pending subscribers in a given month is far greater than the number of customers added in the following month."

Verizon is essentially spending $22.9 billion to build its FiOS network, so that it can offer a pay-TV service.

I believe that Verizon, and other broadband service providers (BSPs) that are deploying IPTV services, should have evolved their service delivery platform requirements to more accurately measure advertising effectiveness -- utilizing the inherent advantages of their totally new digital media delivery infrastructure.

Instead of creating an advertising business model that is targeted, relevant, engaging (i.e. more like the online model) and delivers objective results, most BSPs have launched a platform that incorporates all of the known weaknesses of the legacy broadcast radio and television practices that produce highly subjective results.

Again, given the size of the investment in IPTV deployments, it's imperative that service providers apply creativity to not only significantly enhance the consumer experience, but also use innovations to add-value to their advertiser-supported services.

The upside opportunity will be huge -- for those BSPs who dare to apply some imagination to their service design process.

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