Inside AT&T’s media ambitions
AT&T’s purchase of AppNexus has been perceived as a landmark development for the adtech sector, and widely interpreted as a precursor to a sustained assault on the duopoly’s dominance of digital ad spend.
In its latest earnings call, AT&T revealed that revenue for its advertising and analytics unit, which includes the AdWorks addressable TV group, grew 16% quarter on quarter to generate revenues of $1.8bn – a figure that puts it on a par with Amazon’s much heralded-media offering.
AT&T confirmed the scale of its ambitions in the sector with its purchase of AppNexus, in a deal estimated to be worth anywhere up to $2bn during the immediate aftermath of this year’s Cannes Lions.
It's arguably the adtech story of the year so far with the move clearly indicating the scale of the US telco’s ambitions in the media space, especially since it comes soon after its $85bn purchase of Time Warner (now WarnerMedia).
AT&T declined The Drum’s request to interview, Brian Lesser, AT&T advertising and analytics, chief executive officer, but sources have described the intended union a describes as an “ideal fit.”
However, during the company’s latest earnings call, it revealed that its recent purchases meant that it will soon “have three-times the ad inventory to work with” than its existing AdWorks group – which sends targeted advertising for DIRECTV and U-verse.
The reason for this is that AppNexus has a demand-side platform (DSP) which AT&T can offer to programmatic advertisers the option to buy its ever-growing content library via the AppNexus sell-side platform (SSP).
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Rob Webster, chief strategy officer at Crimtan, says: “This ties in well for AT&T who are both a huge publisher and content owner but also a big advertiser and a company looking to grow fast in advertising technology and services.”
Many believe the latest acquisition from AT&T has long been planned given especially after Lesser spent many years as a board membership of AppNexus – a role made possible after WPP (where he rose to be chief executive of GroupM) invested $25m in the adtech outfit – prior to his shift to the telco.
“Combined with publisher relationships this allows AT&T to tie together the demand side and supply side publishers and challenge Google's dominance of this space,” adds Webster. “This end-to-end solution also allows AT&T to onboard their data in a powerful fashion with much less risk of leakage.”
Others remark how AT&T’s decision to purchase AppNexus, on top of its earlier $85bn blockbuster purchase of Time Warner, resembles the strategy of its US telco rival Verizon Wireless which has gone about constructing its own ad stack over the last two years in the guise of Oath.
Speaking with media in the immediate aftermath of the announcement of the AppNexus purchase, Lesser explained how he wants the AT&T-AppNexus platform to let buyers measure performance and understand audience behavior across mobile, TV and video environments.
During the telco’s latest earnings call, Lesser also went on to share his view on how traditional advertising doesn't satisfy what both consumers and brands are looking for.
“Brands are frustrated with lack of access to data, lack of competence in targeting and measurement and non-transparent ad tech costs,” according to Lesser. “The industry talked about video convergence, but no tangible examples yet have emerged to deliver a unified buy-side and sell-side platform.”
AT&T believes that its library of premium content, AppNexus marketplace plus its datasets generated by its 170 million direct-to-consumer relationships cam give advertisers the scale necessary to help ease such pain points.
“But data needs to be activated to have value,” he says. “We're building targeting and measurement capabilities that will bring greater value to consumers, advertisers and publishers.”
In terms of its future steps, the unit plans to bolster the yield on the inventory it now has through its Turner and WarnerMedia properties.
“You'll see us continue to develop the ad platform,” reads a Seeking Alpha transcript of the call. “AppNexus, once we close that deal, is an important milestone for us, but you'll see us lean in and develop additional technologies around that platform.”
Going forwards it intends to partner with third-party media companies with Lesser noting that its ambitions for furthering addressable advertising in the TV space is likely on its to-do list for 2019, and further ahead.
“In some ways, our success will depend on our ability to attract additional sources of inventory to reach critical mass for advertisers,” he adds.
“We have work to do in terms of building the technology platform, but the good news there is because of the amount of inventory that exists within DIRECTV,” says Lesser.
“Also within WarnerMedia, we can prove out the value of AT&T data and the investments that we're making in technology plus the evolution of our direct-to-consumer relationship.”
Included in this plan are ambitions to introduce TV ad experiences that are “less interruptive” in the hope of reducing ad load time while bolstering its CPMs.
“Imagine a DIRECTV customer watching the big screen on their living room wall and instead of seeing a traditional ad break, they see an icon on a car in a movie that they're interested in or in a show that they're interested in,” he says.
“And then we have the ability to create a seamless ad experience on their mobile device, which is on the coffee table or in their pocket, pause real-time content to interact with a better ad experience and therefore, deliver more relevant content to our customer and to the consumer more broadly.”