AT&T used the tech fest of CES to announce its Sponsored Data program, allowing marketers to pay the data costs of 4G users so they don't have to worry about incurring stiff charges when consuming a company’s promoted content.
The move quickly drew criticism as a potentially anti-competitive threat, leading to preferential treatment for deep-pocketed players to transmit their material online. Advocacy group Public Knowledge asked the FCC to investigate the new AT&T ad option, set to roll out during the first quarter.
But AT&T appeared to get a boost when a federal court the following week struck down the FCC’s 2010 Net neutrality regulations, aimed at maintaining the openness of the Internet. All eyes are now on the FCC, which could appeal the decision, or take the step of reclassifying Internet access as a telecommunications service.
Amid the Net neutrality tussle, ad executives say they’re intrigued by AT&T’s sponsored data offering, which taps into both the content marketing trend and growing consumption of media on mobile devices. Average mobile data consumption nearly doubled last year to 1.2 GB of data per month, according to mobile industry analyst Chetan Sharma.
But it doesn’t come cheap. According to a Consumer Reportsanalysis, getting an AT&T Mobile Share plan with 1 GB of data for one person costs $85 a month. By offering access to certain content or services that wouldn’t count against a customer’s monthly bill, a marketer using Sponsored Data might have a better chance of driving interaction with promoted material.
“The AT&T Sponsored Data program is exciting because so many of our clients create and distribute content to directly engage their customers and build profitable bonds with them -- and this is another way to enrich that relationship,” said Jonathan Adams, senior vice president, head of media, North America at iCrossing. Letting clients subsidize the data costs to encourage more brand engagement helps achieve that goal.
Adams and other Madison Avenue executives are still exploring the opportunity, with questions remaining about targeting capability, pricing and measurement. Exactly what form Sponsored Data efforts will take is also still a bit hazy.
In its announcement, AT&T suggested that sponsored data would be well suited to promoting movie trailers or games, as well as endemic products like mobile apps or a new smartphone model. As an example of what Sponsored Data would look like, AT&T gave the following example in a FAQ:
“A customer may access an application for healthcare from their insurer. Within the application, there is an educational video. The customer sees the Sponsored Data name, identifying that the video is sponsored. When the customer clicks the icon to play the video, the data usage incurred while watching the video is not applied to the customer’s monthly data allowance.”
That likely refers to the plans of United Health Group, an initial advertiser that plans to use the program to distribute health education videos. In the same document, AT&T said the amount of sponsored content is up to the advertiser, and that marketers can set criteria for who gets access to sponsored data.
Among specific features, it listed the ability to set up an offer through any type of data, (from video to a PDF file), track results using AT&T-provided analytics, manage an account via a Web portal, and check billing statements.
Given the uncertainties around cost, will it prove worthwhile for marketers? “The most important question I have is whether the value of subsidized data correlates with an increase in revenue for the advertiser,” said Gabriel Cheng, director of strategy at M&C Saatchi Mobile. “The ideal campaigns are those that Sponsored Data can help drive both new customer acquisition and a lift in overall purchases,” he added.
Kony Solutions, one of the companies working with AT&T's Sponsored Data, is giving developers the ability to create sponsored apps through its app-building platform. “We’ve got a very easy set of hooks and check-boxes that an app developer can use to use AT&T’s back-end data network and infrastructure, so you aren’t being charged when you use that app,” explained Kony CTO Sriram Ramanathan.
He said a hotel chain or airline, for instance, might want to subsidize access to their apps for premium customers using Sponsored Data. But he acknowledged gauging the expense of subsidizing content, whether an app, a video or some other kind of media, could be initially challenging for marketers.
However, not every company is leaping at the opportunity. “We don’t have advertisers clamoring for it,” said Jason Newport, who heads Aegis Media’s mobile practice. He suggested the carrier would be better off letting marketers sponsor data usage more broadly. “So it’s not steering you toward branded content that you may not want to watch,” he said.
He also pointed out that when it comes to viewing long-form video on phones or tablets, especially at home, people increasingly rely on Wi-Fi to avoid racking up heavy data charges. Given the growing pervasiveness of Wi-Fi, toll-free access to mobile content becomes less compelling.
Given the charged political issue of Net neutrality, executives were reluctant to discuss their relation to AT&T’s Sponsored Data. But Newport doesn’t view the program as a threat to Net neutrality principles. He argues major content players like Netflix or Disney aren’t going to get involved because the subsidy costs would simply run too high to be cost-effective.
“I don’t think it’s going to squash mobile innovation,” he said, referring to the concerns of Net neutrality supporters who caution upstarts won’t be able to compete with big companies in underwriting access to their app or other content.
Jeremy Lockhorn, head of emerging media at Razorfish, said the implications of the recent Net neutrality ruling aren’t entirely clear, but could end up playing a role in how receptive people are to the AT&T initiative. “We'll keep a close eye on that, as well,” he said.
It could also just draw more attention to the fact that rivals like Sprint and T-Mobile offer unlimited data while AT&T imposes caps on usage.
Regardless of how Sponsored Data pans out, Lockhorn and other ad executives gave AT&T credit for going beyond traditional mobile ad formats to offer something different. “Marketing, in many ways, is about value exchange. This could be a clear way for brands to provide value to consumers,” he said.