An Advertising Revenue Model for Access ISPs

Abstract

Faced with the unrelenting traffic growth and rising costs, access ISPs (Internet Service Providers) realize that their traditional revenue model of flat subscription fees is unsustainable. Regulatory concerns, e.g., about content-specific charging, constrain the ISPs’ search for new revenue sources. This paper analyzes a revenue model where an access ISP acts as a publisher of ads to users who explicitly opt for an ad-sponsored access plan of the ISP. First, we conduct a survey showing a substantial interest of users in ad-sponsored Internet access. Then, we mathematically characterize the advertising revenue model and asses its economic feasibility based on real data from two access ISPs and an ad publisher. While the ad revenues are tangible, they do not completely cover the costs of the access ISPs. Even in relative terms, a larger access ISP benefits more from the advertising, with the ad revenues covering up to 50% of the ISP’s capital expenditure. Complementing the subscription fees, the access ISPs can leverage the ad revenues to meaningfully incentivize the users with better Internet connectivity, such as 6-9 Mbps in extra data rates or 12-20 GB in extra data caps for the two considered ISPs.