The chutzpah of AOL’s Tim Armstrong shows how telcos are a serious challenger to Facebook and Google’s dominance

Yahoo has invited interested parties to submit their initial offers within the next two weeks according to reports, and Verizon Wireless (which bought AOL a little under nine months ago) has been heavily touted as an interested party.

Regular readers of The Drum are likely to be familiar with my assertion that telecoms network operators are a looming force for disruption in the digital media sector with FT Orange, Singtel and Telefonica among some of the leading parties in the industry. Of course, this is not to mention Hutchison Whompoa’s Three group which has begun installing ad blockers at a network level.

When you consider the recently reported musings of AOL chief Tim Armstrong that the data-powered targeting capabilities of an AOL/Verizon pairing could rival that of Google, it appears that I’m not the only one.

Data-powered targeting capabilities

Verizon has already made clear its intentions to share its users’ browsing habits via the AOL advertising platform with advertisers to better help them hone their targeting capabilities. Add to this the recently reported comments from AOL’s Armstrong which indicate that it is also soon to benefit from location targeting capabilities proffered by Verizon’s network, and the rationale behind his lofty forecasts is clear.

According to a recent Wall Street Journal article, Armstrong has been telling advertisers that he hopes to become the top mobile advertising company on the market by 2020 – a feat that would involve it surpassing Facebook and Google (who collectively possess a 70-plus per cent share of the mobile advertising market).

Such an achievement would see it realise a $20bn a year market with such a pairing having an addressable audience of 2 billion according to the report. Considering that AOL’s revenues were just under $3bn last year, this is quite the project Armstrong has in mind.

Advertisers' desire for more ‘big mobile advertising players’

However, considering that advertisers are already voicing a desire for disruption in the mobile advertising market - both in terms of using alternate models to target users across screens, on top of a generic desire for greater market plurality.

With this in mind, I was reminded by some off-the-cuff comments from WPP chief Sir Martin Sorrell as this year’s Mobile World Congress where he was discussing where the advertising juggernaut was investing its clients’ media budgets.

He explained that Google accounted for $4bn of its total spend last year, making it the sole-biggest media owner it invests with and Facebook coming in as the second-largest digital media owner, garnering $1bn worth of campaign spend from the network in 2015.

Why advertisers are currently under-investing in mobile

However, due to lack of clarity around the measurement of mobile advertising, particularly in the ‘walled garden’ ecosystems of Facebook and Google, he conceded that his company was actually under-investing in the medium.

“We’re increasingly looking at data and measurement. And measurement is going to become absolutely critical. Our frenemies in technology [read Facebook and Google] – the new media owners – are going to have to spend more-and-more time thinking about how they can refine [proof of] ROI for our clients,” he said.

He later went on to state that WPP spent hundreds of millions of dollars last year with AOL, and went on to highlight them as a potential stalking horse when it came to rivalling the big two of digital ad spend, especially if their intransigence over third party tracking continued.

How telcos can prove a point of difference

This again reminded me of a conversation I had with then AOL chairman Bob Lord at DMEXCO, where we discussed the ‘open’ nature of the AOL ad stack, and how it contrasted in its philosophy to the more ‘walled garden’ ethos of Facebook and Google.

“My perspective is that the whole messaging about closed versus open is going to start to converge soon. I believe that if I can do better targeting to provide a value exchange with a consumer when I take an advertiser’s data set, and I can cross-reference it with my data,” he said.

“I’m not talking about personalised data, but when I cross-reference it I can make that advertising better. I don’t believe then that I own that data. I believe then that the brand owns that data, and they can do what they want with it.”

But let’s remember that a few things have to be addressed first

However, it won’t all be plain-sailing for telcos. Both Facebook and Google are eager to justify the ‘walled garden’ accusations by reminding advertisers that it is the social network’s primary duty to protect the privacy of its audiences.

This is something that Verizon itself has already received a rap across the knuckles for, with the telco having to pay a $1.35m fine to the FCC for its fumbling the ball over its ‘supercookie’ activity which failed to adequately warn network users of its tracking.

As a result, fully informed network user permission is required, and the US government regulator is further probing how telecoms operators share its users’ data, with the body proposing that operators obtain users’ permission before sharing information with outside partiers.

Summing up the body’s rationale, FCC chairman Tom Wheeler recently said: “Seldom do we stop to realise that our Internet Service Provider (ISP) is also collecting information about us… we can choose not to visit a website or sign up for a social network... Broadband service is different”.

He went to say that once a network user signs up to an ISP they have little flexibility to change their mind, hence the increased scrutiny in an opinion piece published in The Huffington Post (which is ironically owned by AOL, ergo Verizon).

A change is likely to come

However, let’s not kid ourselves and think that this will put paid to network operators’ plans to increase their share of the digital advertising landscape, and as we can see from the multiple billion dollars they spend on ad tech, it’s pretty clear that they can afford lawyers too.

For such well coined corporations, regulators are usually a mere inconvenience to their corporate strategies, the real dual will be between the telcos and the digital media outlets.