Opinion: Digital advertising is a clear and present monetisation opportunity for telcos

By Ted Woodbery, Vice President of Marketing at Synchronoss

The renewed UK merger rumours recently between Vodafone and Liberty Global, owner of broadband and TV provider Virgin Media, is the latest in the fixed and mobile operator trend for building out multi-service bundles.

It’s easy to understand why European telcos are following this path – revenues across the continent’s mature markets have been static or near-static for several years.

To revive their fortunes (and their margins), operators are pursuing M&A deals that deliver better economies of scale, and which enable them to bring to market integrated service offerings to protect their market share.

In many markets, price is no longer a competitive differentiator, and converged operators are now using content to set themselves apart.

US operator AT&T’s $85 billion acquisition of media giant Time Warner set the tone for this new direction and operators in Europe and elsewhere now seem to be following suit: earlier this month, Orange announced a partnership with US TV network HBO in which it will become the sole broadcaster of HBO content in France.

The deal also opens the door for Orange and HBO to partner in producing original content.

But exclusive content isn’t the only tactic that operators are employing to transform their traditional business models and generate new revenue as digital service providers.

The other route for telcos is to emulate their OTT rivals like Google, Facebook and others with advertising.

It’s with this approach in mind that Altice last month acquired online video advertising start-up Teads for €285 million.

As data has overtaken voice traffic, operators have steadily fallen down the telco value chain.  

Operators today carry over their networks a rising tide of data, services and content from OTT players like Apple, Facebook, Netflix and others – but with no increase in their revenues to show for it.

Advertising is the means for operators to monetise the constantly growing volume of data traffic.

But operators – especially mobile ones - have tried advertising before, and the results left a lot to be desired.

What’s changed for them to be successful this time round?

Firstly, operators’ business models.

As mentioned above, converged operators today offer fixed and mobile voice, data, and TV services.

These operators now have more data than ever on their customers and the services they use.  

Not only what apps and features they use, but also what device they use them on, their location and the time of day they use these features and services, as well as the type of connection they’re using.  

When you combine this broad range of usage data with the demographic information that telcos already have about their subscribers, it’s clear that telcos possess a significant volume of contextual data and in-depth insight about their customers’ interests, online preferences and consumption habits.

This contextual data is hugely valuable for brands and advertisers to reach specific audiences at scale.

They can use it to deliver precisely targeted ads and offers that are tailored to meet a particular audience’s personal preferences and interests, as well as the device or screen that they’re using at any one time.

In this way, telcos at last have the means to emulate their OTT rivals.

They can properly monetise the ever-increasing volumes of data and media content that their networks have until now had to transport on behalf of their competitors, without reward or remuneration.

This all sounds good in theory.

But is there an appetite among brands for the type of granular insight and access that telcos’ data assets can provide?

The answer seems to be a resounding “Yes”.

A recent Ovum study commissioned by Synchronoss into the attitudes and perceptions of brands to telco customer data found that global brands believe telcos outperform tech giants like Google, Apple and Microsoft when it comes to sourcing customer information.

According to the study, brands are certainly interested in using a broad range of data insights to support their future digital advertising needs.

User preferences (44 percent) was the most popular data class, but location information and network intelligence – that is, the type of connection used by the consumer – were both also popular (41 percent).

These findings underline that digital advertising is a clear and present monetisation opportunity for telcos, in Europe and elsewhere.

Digital and mobile advertising is a growing sector - Ovum forecasts that revenues from global online digital advertising will grow from $126.4 billion at the end of 2016 to $158.6 billion at the end of 2021.

The majority of brands surveyed (61 percent) said that they are willing to pay more for data insights and analytics that support enhanced ad targeting.

This is a need that telcos are perfectly positioned to provide, thanks to the range and depth of data and insight available to them.

It’s clear that the scale and breadth of telco customer data and insight is a valuable commodity that telcos shouldn’t underestimate - or undervalue.

As they expand their offerings into converged content and media services, they can capitalise on the growth in digital advertising to generate new revenues.

But there is still work to do.

Telcos need to raise awareness and properly engage with advertisers, agencies and brands to educate them on what it’s possible to do with this data – as well as what’s not possible.

With the right analytics resources in place, telcos can establish a new understanding with advertisers and brands, as an important strategic waypoint on their journey to become complete digital service providers.

 

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