Why Aren’t More Telco Operators Monetising Their Data?

Telco DataShortly after US telecoms operator AT&T announced that it would start using subscriber data to bolster ad targeting on its WarnerMedia inventory, the opposite seemed to be happening over at Verizon, where CEO Hans Vestberg told Axios that its own media unit Oath would have to “survive on [its] merits” without subscriber data.

A couple of days later AdExchanger’s Alison Schiff reported that this wasn’t quite true — Verizon does use certain opt-in data for advertising, and will continue to do so. But the stories highlighted how there still isn’t a clearly defined business model for telcos who want to monetise their vast data sets by combining it with media, and that even the leadership of those organisations aren’t 100 percent clear even about their own strategies.

In theory at least, the data opportunity for telcos could be huge. “The value of a telecoms operator as a data source is largely the demographic data they have,” said Daniel Heer, founder and CEO of data platform Zeotap. “For example, in Europe and in India, users that buy a price plan have to show their government ID card, and in the registration process they give a lot of demographic data.”

“While this kind of data might seem boring, large brands, especially in the CPG sector, base their entire media buying strategy on age and gender,” he continued. “And the quality that telcos can provide, based on the registration process, is second to none”.

In addition to demographic data, telcos that offer broadband and pay TV services are also likely to have access to both set-top box viewing data and browsing data. In the US, a number are already attempting to make the most of this opportunity and alongside AT&T and Verizon, Altice and Sprint have using customer data for advertising.

But many telcos have been slower to move in other markets. “I would say it’s not so common,” said Heer. “There’s a certain number of carriers that are thinking about it, but they need to be convinced there’s value in their data.” So what’s holding them back?

Management and Consent

One problem is that while telecoms companies have access to a wealth of ad-friendly data, many simply haven’t organised that data in a way which makes it useable for advertising.

“It’s a very different picture from operator to operator,” said Florian Lichtwald, Zeotap’s SVP of global telecom and data partnerships. “So some of them have implemented in the past advanced DMP solutions, and are in a position where they can manage the data of their users internally and make it accessible for their own ad campaigns. Whereas others are even buying external data because they’re not able to activate their own data sets.”

Graeme Hutcheson, director of advanced advertising at Sky, said data organisation was crucial for the success of AdSmart, which uses a mix of Sky’s first-party customer data and third-party data for targeted linear TV ads. “There’s always been so much data that’s flowed through the business, so it’s something Sky has been on top of as a subscription business for a long time,” he said. “I feel that we’ve always had a very good handle on our data, and how it can be used for the benefit of the customer, and that has been a very large part of why AdSmart has been so successful.”

Privacy regulations further complicate things of course. A senior source from Telekom Deutschland, who preferred to remain unnamed, said European privacy laws place limits on how data can be used. “As a European company, with the official rules and regulations, we have to follow these limits when we work with our data,” they said. “When we utilise our data we can only do that based on segments – we can’t combine usage with specific users. And we build those segments to address our users with specific offers.”

Hutcheson said Sky similarly avoids making its targeting too granular. “From a data policy perspective, we make sure that we’re only ever targeting an aggregated audience – you’re not able to target any more granular a level than 5000 homes at once,” he said. “That’s one of our self-governed lines that we don’t cross, and customers have the option to opt-out if they wish.”

Alternatively, operators can ask their customers to opt-in to use of their data, allowing them more freedom with how that data is used. But Zeotap’s Lichtwald says opportunities to collect consent are few and far between, so telecoms companies have to make every one count.

Scale and Investment

But beyond the problems associated with organising data and getting consent, for some telecoms operators there are more fundamental problems holding them back. Many of those who are monetising their data have made big investment in ad tech and in media, meaning they have the technology and inventory necessary for running targeted ads.

Without these pieces in place, some data monetisation strategies just aren’t viable. “You’ve got to have quite a number of pieces in place to make it work properly,” said Hutcheson. “So at Sky, we have verified customer data not just login email addresses, we have the sales house, we have the set-top box and we have the content. If you don’t have one of those pieces, you can’t make it work.”

The source from Telekom Deutschland meanwhile sees an opportunity to use first-party data to power advertising on it’s in-development over-the-top (OTT) services, but they see their platform as being a technical enabler more than anything else.

Differences in regulatory standards make it more difficult for companies like Deutsche Telekom to make the same sorts of big acquisitions as its US counterparts. “Regulations in the US are more lax than in Europe I think, which is why we’re seeing media and data convergence happening much more in the US,” said the source.

Lichtwalt said that market fragmentation in Europe also means telecoms operators often lack the scale necessary to pull off these sorts of moves. “From our perspective, it’s clever to do that in the US, because you have one large market,” he said. “In Europe though you have much higher market fragmentation. So if a telco bought an ad tech company to help them monetise their data in the UK, it doesn’t make so much sense, because their commercial output would be very different from a US telco like AT&T. If a telco’s data only covers 20 percent of the market, it doesn’t make all that much of a difference.”

Alliances are one potential solution to this, but these can be fraught with difficulties, as demonstrated by the troubles encountered by Weve, a collaboration between O2, EE and Vodafone aimed at using telco subscriber data for targeted advertising. But the business struggled and was bought out entirely by O2 in 2015, and stopped running ads late last year.

That’s not to say it’s impossible for European operators to make similar moves to the likes of Comcast and Verizon. But buying up ad tech and media is expensive and risky, and Lichtwald says operators tend to avoid risk where they can. “Telecoms operators are the most conservative enterprises you can find, and for very good reason, because they have a lot to lose,” he said.

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