Telcos could leverage ad tech to monetize their data and compete against the Facebooks and Googles of the world – if they do it right.
According to a report by We Are Social, there is now a total of 4.9 billion unique mobile users globally, about 66% of the total world population. In the midst of this digital revolution, data has become the life-blood of marketing and advertising. The early winners in this new world order have arguably been Google, Facebook, and Amazon, which together control approximately three-quarters of the global mobile advertising market.
Their success comes down to two primary factors: their masses of data and their global scale. The only other companies that have enormous amounts of individual-specific data, particularly on mobile devices, are mobile operators. They are sitting on a gold mine of user data that could be leveraged for advertising.
Telcos have huge potential to monetize their data streams, shake up the digital advertising industry and viably compete against the Facebooks and Googles of the world. This is particularly true in Asia, which is often touted as the world’s only “true” mobile-first region. In fact, the same report by We Are Social, pegs the amount of mobile social users at 1.4 billion; that’s larger than the rest of the world combined. But how can telcos win the struggle against Silicon Valley’s biggest names? And, more to the point, should they even try?
Why telcos need change
For a few years now, telcos have seen a plateau in revenue from their core business due to intense competition and market saturation. The ascendancy of Silicon Valley giants has caused telcos to increasingly fall victim to the “dumb pipe” scenario in which they’re unable to monetize their networks even though it’s their “pipes” that are transferring data between the customer’s device and the internet. Any advertising delivery is subsidized to third parties, yet telcos, while they facilitate the advertising transaction, are left without any incremental revenue.
Telcos looking to diversify their businesses should look towards digital advertising as a potential growth engine, one they already have the raw resources to succeed in.
Telcos have two significant advantages: their access and reach, and their wealth of customer data. Much of Facebook’s revenue growth can be attributed to its incredible amount of deterministic data on each user. But Facebook doesn’t own the mobile pipes or have a one-to-one, transactional relationship with its users. This is where telcos can gain advantage. With advertisers looking to take their campaigns across screens, the telco’s ownership of the mobile network infrastructure around the delivery of ads has huge revenue potential.
Turning data into revenue
Getting it right won’t be easy. Telcos are faced with several choices about how to best leverage their data for advertising.
Telcos have incredibly lucrative first-person, customer-behavior data, but it remains relatively unexploited. If laying all opportunities on a risk spectrum, far on one side, the easiest, least risky and more obvious option for telcos is to sell the data to advertising companies. While this may lead to a quick injection of cash, they are essentially ceding their data for another company’s benefit.
On the opposing end of the spectrum, and most risky, is a side-step from their core business: become an ad tech provider, going all-in on monetizing their data on their own and actively building, maintaining and supporting the ad sales process. Building an ad tech service from the ground up is a tall order, and the risk is much higher as the company’s core principles may be compromised in the process.
So what’s the middle ground? One option available to telcos is to partner with other telcos, pool their data together and sell an aggregate data set for advertisers to leverage.
This option, building a telco conglomerate, boils down to a problem of scale. Without large-scale, multi-national networks, telcos considering diving into ad tech don’t stand a chance against the likes of Google, especially with Google starting to develop its own pipes and, now, smartphones to circumvent access to those that control the infrastructure.
The appeal is understandable. By engaging in international expansion through partnerships with other operators, telcos can expand their client base as far as possible. However, even gaining the necessary scale through expansion doesn’t necessarily give telcos the required technical expertise and experience they need to succeed in the advertising sector; and jumping enthusiastically, yet naively, into a new industry could prove too big a challenge.
Ad tech: buy, partner or what?
Building and partnering present challenges, risks and distractions causing some telcos to turn to ad tech firms to build out the capabilities of monetizing their content. In Asia, for example, Singtel recently announced its acquisition of Turn, a data management and demand-side platform, through its digital ad arm, Amobee, which was itself acquired by the telco in 2012.
From a cost and organizational perspective, multi-million dollar acquisitions to procure the right technology and expertise is not always possible, nor the most cost and time-effective strategy. Telcos in that position can consider partnering with companies who provide bespoke ad-tech solutions. A platform with a holistic approach to video advertising sales gives businesses the ability to manage and optimise campaigns across direct and programmatic channels in one platform, including ad decisioning, audience targeting and real time forecasting – essentially, all the tools needed to understand and enhance campaigns. By using a holistic ad-tech platform, telcos can benefit from a cost-effective, smart technology that allows them to capitalise on new opportunities whilst staying in control of their data and most importantly, the direction of their business.
This is the ideal time for telcos to gain back control of their data. Before shelling out millions to acquire specialist ad-tech technology, telcos should consider their options carefully. There’s no question the time is now for telcos to monetise their data, but they should do this without compromising the integrity of the company’s core business, breaking into an unfamiliar market. While ad tech remains relatively unexplored by telcos, working alongside companies that can offer affordable, scalable ad tech solutions, telcos of all sizes have huge potential to succeed in this growing industry.