With 5G undergoing its first public trial during the Winter Olympics, and likely to be a key focus of Mobile World Congress kicking off in Barcelona next week, James Rosewell, founder and CEO of 51 Degrees, asks why the world needs 5G and how it will it impact the advertising and publishing industries.
First up, among all the hype and excitement around 5G, it’s easy to lose sight of what it is, so let’s start with a definition. 5th generation mobile (5G) is an engineering work in progress aiming to deliver on a number of goals. These include cost savings, with lower transmission costs per gigabyte (GB) of data compared to 4G/LTE for mobile network operators (MNOs). Better connectivity is another factor – 5g promises to deliver lower latency, sub-millisecond end-to-end network connectivity. Massive density is another 5G deliverable, with the ability to support 1000 times the number of devices per geographic area compared to 4G/LTE. Finally, it will be faster. At 10 times the bandwidth of 4G/LTE, 5G will theoretically enable a full HD video to be downloaded in one second, though I’ll believe that when I see it.
But standards are still being formed, and ultimately MNOs will need to decide when and how to invest in the technology. They’re only going to make this investment when there’s a clear commercial case. As consumers are unlikely to pay more for 5G alone, MNOs have two routes to justify the investment.
One is to lower operating costs by transferring a gigabyte of data at a significantly lower cost than existing solutions do. This requires significant upfront investment, because sufficient 5G handsets need to be in consumers' hands, with sufficient cellular network infrastructure to support them.
Handsets need to be subsidised and network equipment deployed. This all takes time and vast capital investment and it only makes sense in areas of high population density. The GSMA (the industry body for MNOs) forecast that by 2025, only 12 per cent of the world’s data will be transferred over 5G.
However, there is another compelling option for MNOs, and it is one which strikes at the heart of their commercial challenges - partnerships.
Content is king
Today, the data being transferred from a mobile phone to a web site or application travels over multiple physical networks. There’s the MNO's radio network, their other infrastructure, the public internet and then the web site provider’s infrastructure.
When a design goal of sub-millisecond end-to-end connectivity is considered, the radio network ceases to be the bottleneck. The public internet and the web site owner’s setup become far more significant. To deliver the consumer benefits of instantly-loading web pages, the content or service needs to move electronically closer to the consumer.
The significance is not lost on MNOs wishing to justify 5G investment. They have an eye on content partnerships where revenue is shared with MNOs in return for moving the content closer to the consumer and providing a faster-performing service than would otherwise be possible. Revenue can flow from advertising, but also from subscriptions that are simple to setup and administer. Given that mobile is now such a significant medium on which to consume content and services, no publisher or ad tech business can afford to ignore this change in MNOs’ thinking.
MNOs are at least as vexed as the ad tech and publishing industries by the power of Facebook and Google. For MNOs, 5G represents an opportunity to increase revenue through sharing agreements, in return for improved quality of service.
Revenue models will become more complex if publishers wish to benefit from the enhanced role MNOs will play in service delivery. If past experiences can be relied upon, there will be a nervousness in embracing new technology, and MNOs will be looking for flagship content partners. Now would be a good time for publishers to start engaging with MNOs to understand their intentions.
In theory at least, MNOs have more first-party personal data than anyone else and, importantly, permission to use it. MNOs have been slow to leverage the commercial benefit of this data. 5G provides a compelling reason to do so. Any ad tech company in the personal data business needs to understand the MNOs' plan in the territories in which they operate. The MNOs, between them all, know about every person of significance.
The bandwidth and latency benefits of 5G bring significant advantages for advertising. Ads will load faster, enabling richer video and interactive ads to be served with confidence, and viewability standards to be met more easily. But the ad tech ecosystem of servers, exchanges, SSPs, DSPs and DMPs needs to deliver faster performance. In a world where a customer can receive a response instantly, the programmatic auction will need to complete in a few milliseconds, not the 100s of milliseconds as it does in practice today. The architecture of ad tech will need to evolve, abandoning the constraints of the status quo.
Questions to ask
5G isn’t a tactical issue to be addressed in 2018 alongside header bidding, viewability or brand safety. It is, however, something to put on the strategic roadmap and to start preparing for. Here are some questions every ad tech business and publisher should be asking:
Are we engaging or capable of engaging with MNOs? If not, shall we work with a third party to syndicate our content instead? Do we want to be an early adopter? Who in the partner and content teams at MNOs should we be talking to?
Does our technology roadmap support faster performance and simpler deployment options? Is it flexible?
What design and structural changes must we make to our content to support the possibilities of faster and richer digital experiences?
Are we working with partners who understand the challenges and are prepared?
5G presents a clear opportunity for ad tech and publishers to address many systemic problems over a realistic timeframe. Prepare now to embrace the 5G opportunity in the early 2020s.