Telco Ad Tech Investments Follow A ‘Wheel Of Fortune’ Philosophy

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Today’s column is written by Matt Keiser, founder and CEO at LiveIntent.

Monday’s news of the Tapad acquisition by the Norwegian mobile carrier Telenor is a complex play for the cross-device crown.

The general feeling is that we are on the cusp of a new era in which telecommunications companies (telcos) realize their potential by acting on the writing on the wall. In the words of AdExchanger’s Allison Schiff, Telenor and other telcos have “churn to reduce, average revenue per user to juice and dumb pipes to monetize.”

While it seems like investors are running from digital advertising, fundamentally digital is growing and will soon surpass TV. There are few things you can count on, but one is that the role of data, the life force behind marketing and advertising, is front and central to future success.

Everyone knows there will be winners in the market but exactly who will the winners be? The companies with the most data. The early winners include Google, Facebook, Criteo and Amazon. These incumbents create more revenue from each user than any traditional digital company ever because of their data.

There’s another truth: In a world of infinite inventory and fragmented attention and device usage, the old way of marketing and advertising to devices is becoming less effective. Although it may not be obvious, the people data that makes Google, Facebook, Criteo and Amazon powerful is the same people data needed to build an effective cross-channel and cross-device strategy. In 2016, there is no doubt that data is king.

Data was obviously always important for Amazon, Google, Facebook and Criteo to deliver their services. In this next era, where the average person is expected to have 4.3 devices by 2020, the same data is also key to building and wielding a cross-device and cross-channel identity (or no identity) graph. This concept of the graph is what many experts see as the future of the industry.

Logins and log files, the building blocks of identity and no-identity graphs, are contained within the incumbents’ original data set. All you need is to add algorithms and business rules to the data or, in the case of Verizon/Telenor, an acquisition.

Like the early success stories, future winners will be skilled at combining, acquiring and deploying data. The reason why may be best explained by the classic game show “Wheel of Fortune.”

Deterministic Vs. Probabilistic

As background, nearly every company in our industry can be put in two camps: open web players, such as Rubicon, Criteo, Oracle, MediaMath and AppNexus, or closed web players, including Facebook, Twitter, Verizon/AOL and Google.

Both camps struggle with positively identifying customers in cross-device and cross-channel marketing efforts. Even Facebook, which has incredible login data across desktop and mobile – the basis for a deterministic graph – still has incomplete data.

On the other end of the spectrum, a probabilistic identity match is the way to identify a user without login data. It’s an educated guess at the user behind the device. Probabilistic graphs offer scale and can fill in the gaps, the same way “Wheel of Fortune” contestants buy vowels to get closer to the answer.

But probabilistic is limiting: You can’t do measurement and attribution down to the person because guesses never walk into stores and buy things. Probabilistic also prohibits marketers from doing things that require affirmative consent, such as honoring a suppression or targeting a pre-approved audience.

Deterministic data is accurate, but most companies don’t have it at scale. In the best scenarios, a technology provider has both deterministic and probabilistic data but only deploys probabilistic data when it doesn’t have enough deterministic data and accuracy is not imperative. That’s the “Wheel of Fortune” equivalent of guessing the answer when you have 50% of the letters.

There are times when you want hyper-accuracy, such as for a pre-approved offer, and times when you want reach, including while running a retargeting campaign that gets 10 times the performance. When Telcos can deliver both, they have a tremendous advantage.

This is the biggest conversation in the industry right now. I saw it at Industry Preview 2016 during a panel where Omar Tawakol, SVP and GM of Oracle Cloud, discussed getting it right versus getting it right at scale.

Why do Google and Facebook make so much more per user than everyone else? I recently saw a slide from Larry Ellison at IAB’s Annual Leadership Meeting showing that Facebook monetized each user at $296 and Google at $451, compared to $10 for many publishers. The reason is because Facebook and Google data provides more resolution, allowing them to be infinitely more profitable than the average publisher.

Telcos will be among the players that will fuel the next big wave of marketing innovation in our industry. Some companies may have bet their marketing strategy entirely on probabilistic models – the consonants – while others have bet entirely on deterministic – the vowels. Either way, their strategy for guessing the answer will be lacking one or the other.

Telcos Have Done This Before

With Telenor acquiring Tapad (disclosure: I was an early Tapad investor) and Verizon acquiring AOL, you might think this is the dawn of the telco jumping into the advertising game.

But these aren’t unchartered territories. One could say the first great telco acquisition took place in 2006 when SoftBank, a Japanese multinational telecommunications and Internet corporation, bought Vodafone Japan. SoftBank also had a joint venture with Yahoo Japan, which has a reputation for innovation. It’s unclear if Yahoo Japan had a hand in the Vodafone acquisition but Yahoo Japan and SoftBank were years ahead of the west in pursuing an identity graph.

Another Telco deal that seems ahead of its time also hails from the East. Singapore Telecommunications acquired mobile ad tech firm Amobee in 2012, before Amobee’s subsequent acquisition of cross-channel platform Adconion and ad network Kontera.

To me, it makes perfect sense. To use Schiff’s words, Singtel probably also had “churn to reduce, average revenue per user to juice and dumb pipes to monetize.”

Hangman May Replace ‘Wheel of Fortune’

“Wheel of Fortune” is a less macabre version of hangman, where each missed guess sends the condemned a step closer to being hanged. But maybe hangman is the better comparison in 2016.

“Wheel of Fortune” is fun and breezy, led by Pat Sajak’s inane blatherings. That may have been a fitting backdrop for the ad tech of yesterday, which was marked by periods of growth and the same players that failed upward. Even some of the more poorly designed innovations were acquired.

But in today’s world of disappointing IPOs and desultory stock performances, the ad tech of 2016 has moved from “Wheel of Fortune” whimsy to hangman realities.

In hangman, there are three possible outcomes. You can sit on the sidelines and not guess, which guarantees you are no better than hanged. You can guess incorrectly until you are hanged or you can take an educated guess and win. What we’re sure to discover soon is that the telcos that take action will likely do very well as the market shifts to marketing to people, which mobile has made a necessity.

Those that do nothing are destined to be hanged, slowly.

Let’s Solve The Puzzle, Pat

The obsessives at Slate broke down the math of “Wheel of Fortune” and, unsurprisingly, concluded that the more letters contestants have before a guess, the better off they perform and the more money they make.

This is the same dynamic that will rule the future of digital advertising as solutions are created for the cross-device challenge. The more clues we have about the identity or anonymized identity of users, no matter what device they are on, the better off the cross-device marketing will be.

Verizon and Telenor have the consonants of deterministic data, in terms of the actual devices and their respective anonymized IDs. They recognize the biggest opportunity is having the option to dial up accuracy or scale to best serve marketers across devices and channels. So they went shopping for vowels, which took the form of AOL and Tapad, respectively.

For me, buying letters to get closer to solving the puzzle in “Wheel of Fortune” is the most obvious parallel to cross-device. It’s just the “Tip _f th_ ic_b_rg.”

Follow Matt Keiser (@mrkeiser), LiveIntent (@LiveIntent) and AdExchanger (@adexchanger) on Twitter.


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