Sponsored data plans are not zero rating – or are they?

sponsored data vs zero rating
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ITEM: Sponsored data plans can still be a win-win plan for operators, advertisers and customers, says a new report from Strategy Analytics – they just need to think of a way to actually make it work. And in some markets they may also need to work around market and regulatory confusion over the difference between sponsored data and zero rating.

Strategy Analytics insists that sponsored data has the potential to help mobile operators not only cash in on the mobile advertising market – which reached an estimated $80 billion at the end of 2017 – but also help them compete against the likes of Facebook and Google who currently dominate that market, said Nitesh Patel, director of Wireless Media Strategies at Strategy Analytics, in a press release:

“Sponsored data should be considered as part of a broader advertising strategy to position CSPs as an alternative destination to big web scale companies like Google and Facebook for mobile advertising dollars. Raising awareness and providing proof points of the results that can be achieved by brands with sponsored data campaigns in each market and for specific use cases remains important — we encourage CSPs to work together and with associations to increase awareness of the benefits of sponsored data and data rewards.”

Sponsored data plans are not a new idea, of course, but advertisers have been reluctant to get onboard. According to Strategy Analytics, there are a few key reasons such plans haven’t taken off yet: too much fragmentation of operator offerings that results in low brand awareness for advertisers, and doubts about whether consumers see value in such plans, especially in markets where operators are offering bigger data bundles, or where Wi-Fi is easily available.

On the bright side, the report says, the sponsored data ecosystem is evolving thanks in part to analytics and feedback loops for campaigns, as well as collaborative efforts to make onboarding for CSPs and sponsors easier:

This can be seen in Catalyst activities at the TM Forum that involve Orange, Datami, Comptel (now part of Nokia), Sigma, cloudsense and cloudstreet, as well as collaboration between Syntonic and Tata Communications for a cross-operator sponsored data exchange model. The recent acquisition of sponsored data/data rewards pioneer Aquto by Mavenir showcases the value CSPs and their vendors see on new types of monetization opportunities.

It’s worth clarifying at this point that the Strategy Analytics report is talking strictly about sponsored data plans in which a third party foots the bill for the data used to access the app, data stream or web browsing session, or programs like data rewards, in which the user gets a reward of data added into their mobile account as a reward for some kind of engagement with a brand or advertisement, for example.

The report does not include zero rated apps where consumers can use specific mobile apps and services without the data usage counting towards their data cap.

The distinction is important because net neutrality advocates have claimed for several years now that zero rating violates the principles of neutrality because it essentially favors big digital content players that can afford to subsidize usage of their services over startups. More to the point, many net neutrality advocates also tend to use the terms “zero rating” and “sponsored data” interchangeably to the point that consumers and regulators may not understand the difference.

That matters because according to various surveys, most consumers are in favor of net neutrality, but many of them also like the idea of being able to binge-watch Netflix, say, without worrying if they’re going to go over their data cap. Many also say they would be happy to put up with ads in exchange for a cheaper data plan. But it’s unclear whether those same consumers realize that zero rating might constitute a violation of net neutrality, or whether they understand that an ad-subsidized plan is quite different from zero rating. It’s also unclear whether they might avoid such plans if they thought they were anti-neutrality (whether they actually are or not).

Meanwhile, the regulatory landscape for this is all over the place. A number of pro-neutrality regulators in countries like India, Canada, Japan, Chile, Norway, Netherlands, Finland, Iceland, Estonia, Latvia, Lithuania and Malta, among others, have ruled that zero rating is a violation of net neutrality. Other pro-neutrality regulators make exceptions for it.

Susan Welsh de Grimaldo, director of service provider strategies at Strategy Analytics and co-author of the sponsored data report, explained to Disruptive.Asia in an email that regulatory views and interpretation of regulation on sponsored data and zero-rated data varies and can change even in countries where regulations are already adopted.

“In some cases, regulators do not disfavor zero-rating if all sources of the same type of traffic are treated equally (for example, all streaming video) but in others any type of zero-rating, whether paid for by a sponsor or offered directly by an operator, can come under scrutiny,” she said.

She added that in countries with net neutrality policies that are ambiguous about the difference between sponsored data and zero rating, the data rewards concept “is one way to allow brands or advertisers (or operators themselves) to offer a reward of data that can be used for any data and thus does not violate net neutrality in markets where that is an issue.”

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