AT&T is readying a coming out party of sorts for its lower profile targeted advertising business.
Over the past few months, AT&T has quietly moved into the area, expanding the reach of its advertising network, launching a Groupon-like daily-deals site, and testing out a location-based mobile marketing service. In October, the company plans to open up a media labs facility in New York to formally bring the business to light after re-launching earlier this summer as AdWorks.
The moves are part of a broader initiative to get AT&T deeper in the targeted business, a lucrative area that has lured in a number of other companies. As such, the company is going up against the likes of Google, Microsoft and Facebook, large companies with more extensive experience in serving up specific ads to its users. It also potentially ensnares AT&T in the same kind of privacy concerns plaguing those technology companies.
The Dallas telecommunications giant's ace up its sleeve is its large subscriber base. The company boasts nearly 100 million wireless subscribers, 16.5 million high-speed Internet customers, 5.3 million TV subscribers (although only 3.4 million U-Verse TV subscribers can get the ads), and millions more using its online search sites such as YP.com. AT&T promises advertisers access to valuable customer user habits and more accurate placements of commercials and ads.
"We're very excited to present something that's new," said Maria Mandel, head of marketing and media for AdWorks. "The re-launch is bringing more scale and reach capabilities than ever before."
The total interactive advertising market is a lucrative one. The area is expected to generate $34.46 billion in revenue this year and more than double to $76.62 billion by 2016, according to Forrester Research. Of that, the mobile advertising part is expected to grow the fastest, going from $1.65 billion this year to $8.24 billion in 2016.
"There definitely is opportunity," said Greg Sterling, a consultant with Sterling Market Intelligence. "It's still early enough in the market and AT&T could be a significant player."
Rebuilding the business AT&T nabbed Mandel a year ago from advertising giant Ogilvy, where she ran the digital innovation group. Mandel's job was to help whip the company's interactive advertising business into shape. Over the past few months, the unit has seen some dramatic changes.
In June, the company renamed the business AdWorks from Advanced Ad Solutions and promised a tighter focus on the targeted advertising business. AdWorks takes its customers' usage pattern, discerning everything from personal interests to age and time of use, and offering up advice to marketers on where to place the most effective advertisements. Its pitch to advertisers: work with us, and we'll get your ads to the right customers on their PCs, televisions and cell phones.
AT&T is unique in that it's the only carrier to have a significant presence in the ad business. AdWorks, in its prior incarnation, has long sold ad space to marketers. But in the past year, the company has greatly expanded its inventory of available ad space--including listings on Web sites and display ads on smartphones and apps--and worked to offer more precise data to its advertising customers.
In addition, AT&T has followed the hot trends in the industry. In February, AT&T began testing a location-based marketing service called ShopAlerts. The service would send you a text message with a coupon or promotion if you got close enough to a participating retail partner. The trials took place in New York, Los Angeles, Chicago, and San Francisco.
AT&T recently wrapped up the trials and is looking to eventually launch the service nationwide, although it hasn't set a timetable yet.
In May, the company launched a daily deals service called YP Deals, part of its YP.com Web site, also known as the Yellow Pages. The service began in Los Angeles, Dallas, and Atlanta initially and works with its YP mobile application. The Groupon-like service also counts social check-in service Foursquare as a partner.
Privacy a concern
AT&T will have to walk a fine line between delivering targeted ads and protecting its customers' privacy, an issue that Google and Facebook continually wrestle with. In AT&T's case, the sanctity of its customer's privacy--and potential backlash--is even more crucial because they are generally all paying subscribers. The company says it doesn't offer up any specific individual information and only delivers large chunks of anonymous user data to advertisers.
"At the heart of the program is privacy," Mandel said. "We feel like we are really leading the industry in safeguarding consumer privacy."
For online usage, AT&T will track searches made on its YP.com local listings site to deliver ads that match the person's interests and usage pattern. The company automatically does this, although it offers users the option of opting out of the service.
Less than 1 percent of people who read the message detailing the option to be removed from the program actually opt out, according to Mandel.
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The mobile side is more stringent. For AT&T's ShopAlerts trial, customers had to sign up on the Web site, and then confirm with another text message before they could join the program. Many companies tend to repackage user data and sell it to advertisers, according to Sharon Goott Nissim, a fellow at the Electronic Privacy Information Center's consumer protection counsel, adding she was glad to see the opt-in method used for the location-based services.
"The important thing from our perspective is that companies should be getting meaningful consent from consumers to share data with third parties, especially if the information is personally identifiable," she said.
AT&T U-Verse TV customers sign up as part of their overall service agreements. AT&T, however, doesn't send user-specific ads, and largely runs commercials based on the programming. The interactive ads shown on AT&T is something the other cable providers have also begun offering to customers.
Mobile opportunities Of the three screens, mobile shows the most potential. The mobile marketing business is expected to grow at an average rate of 38 percent a year, according to Forrester Research.
Mobile offers more precision targeting than the other mediums, and is the primary reason Google invested so much into Android.
The market is also far more fragmented, with ads running on mobile Web sites, within applications, and on basic handset Web portals. Because most smartphones include a global positioning system chip and a constant connection, it's easier to deliver behavioral targeted ads to customers.
"Behavioral targeting is widely used, and pretty effective," Sterling said, adding that it's a controversial practice that is still facing regulatory examination.
Mandel, however, doesn't believe those concerns are warranted. She believes most customers want ads that are relevant to them.
"It's the holy grail of marketing, where advertisers have talked about reaching the right customer at the right time and the right channel," she said. "That couldn't happen until recently."