Ad Revenue for ISPs

Many have promised and failed to deliver cash to ISPs, but one company has a plan that just might work.

by Alex Goldman ISP-Planet Managing Editor [January 13, 2009]

Kansas City, Mo.-based Adknowledge has a pitch for ISPs that we've heard before, but this company may well get it all to work by trying something less ambitious than its predecessors.

Several companies have tried to build advertising systems that would do all of the following: deliver geo-targeted ad space to advertisers, obtain information about subscribers from the ISP, and replace general ads that pay less with better ads that cost more, repaying any advertiser whose ad is replaced and even in some cases sending some of the cash to the ISP subscriber.

All of this had proved to be very complicated for such companies as Adzilla, Phorm, and NebuAD. One company told us that the problem was over-promising and under-delivering, in the article Front Porch Says Competitors Over Promise Behavioral Ad Revenue.

What it does
Adknowledge promises less—but will be able to deliver.

The company is placing text ads in instant messaging, websites, e-mail, and other media. The text ads do not replace other advertising, so none of the complications of other systems arise.

Some have raised privacy objections, but Adknowledge stores only what Travis Tisa, general manager of Adknowledge's messaging channel, calls industry standard information. "We store the types of ads the user has seen, and no demographic data. We do not store geographic data; we obtain it from the IP address."

I have to note that although NebuAD was hurt by privacy issues, Phorm appears to be successful, with British Telecom as a noted customer (though not without controversy as in the article British Telecom's Ingenious Way Of Ending Phorm Criticism).

Adknowledge, unlike many of its competitors, provides ISP subscribers an opt-out (but does not require that they opt-in).

Furthermore, Adknowledge does not promise massive and unrealistic amounts of revenue. "Revenue depends upon the ISP's traffic volume," explains Tisa. Note that add traffic volumes are measured per thousand (CPM), and volumes vary over time. Furthermore, ad sales are usually smaller than traffic, so some traffic generates no revenue.

Tisa says that the effective revenue is about $2 CPM on outbound mail and $0.30 on inbound mail.

Adknowledge sets up a web-based marketplace and advertisers bid based on pay-per click. Asked for an example of an advertiser, Tisa mentioned bamboo flooring, which is becoming increasingly popular for being green and free of toxins (see, for example the CNN article Your house can make you sick).

E-mail is better than search
Tisa says that the company's market research shows that 85 percent of internet users spend 85 percent of their time outside of search websites, on e-mail, social network, instant messaging, and other pursuits. Although bids for ad placement on Google are high, the company hopes to open new markets, delivering more traffic for advertisers (and lowering prices).

At the moment, the company specializes in the English language (with offices in the UK and Australia in addition to several offices in the U.S.).

The company is looking at other media, such as cell phones.

What it is
So how does it work? "The ISP installs no equipment," says Tisa. "It's similar to a banner ad on a web page. The ISP just inserts html code into e-mail. It's simple and straightforward."

What size of ISP does Adknowledge prefer to work with? "If an ISP has less than 100,000 users, the revenue opportunity starts to diminish," says Tisa, "but today's 4,000 user ISP could be tomorrow's 400,000 user ISP. We're interested in talking to any ISP, big or small. I'm a big fan of the little guy."

—End