What Happens When Telcos Stop Sharing their Location Data?

Data-Driven Thinking" is written by members of the media community and contains fresh ideas on the digital revolution in media.

Today’s column is written by Peter Lenz, senior geospatial analyst at Dstillery.

In late June, Verizon made the somewhat controversial decision to stop selling location data to third-party brokers. AT&T and Sprint quickly followed, making it much harder for advertisers to access insights on two-thirds of the devices in the US.

There’s still a lot of uncertainty surrounding how each telco will define its policy for selling its data going forward. None of the carriers will stop selling location data completely, and there are questions about exactly what each telco means by middlemen or intermediaries.

These decisions will ripple across the digital ad ecosystem, touching brands, tech platforms, data vendors and the telcos themselves in significant ways. I see three possible scenarios, some of which are already underway.

A telco tax

The telcos want to own more of what happens on mobile devices, including advertising. They view the programmatic advertising industry with envy right now. Mobile programmatic ad data contains device information within it. Restricting the amount of data released to the world gives the telcos more power.

This is especially appealing for AT&T and its recent acquisition of AppNexus, which collects and uses that very same data. Without net neutrality, there’s nothing stopping AT&T from levying a tax on advertisers who want to reach its subscribers by requiring ads on AT&T devices to be bid on within an AT&T exchange, with the company placing a surcharge on every bid.

An ad tech scramble

Many vendors selling location data license the data from other companies, whether that’s directly from the telcos or a third party. Most demand-side platforms (DSPs) and data management platforms (DMPs) do not collect this data but get it from intermediaries – most of which were either just cut off from the telco location data or have a chance of getting cut off.

Verizon noted that 75 companies obtain its data from LocationSmart and Zumigo, just two of the brokers that work (or worked) directly with Verizon.

Players that collect data directly from devices via the programmatic bid stream or independently license it directly from apps aren’t affected by this decision.

Location players in the ad tech space – the data vendors, DSPs and DMPs – are now either scrambling for new location sources or having a great day watching competitors lose their data.

This decision underscores the fragility of the ad tech industry. Many companies built businesses on top of a single data supplier.

No one wants to say they just lost their data, so some must now explore every opportunity. In the coming weeks, the industry will see companies cast around to find any and all independent data sources that will work. This includes panel-based companies, which might be built on some strong PII-based insights but offer low scale.

If they string together enough panels, a provider might be able to achieve some semblance of scale but with an immense amount of maintenance required to make the data asset usable.

Brand education

Donald Rumsfeld once spoke of “known unknowns” and “unknown unknowns.” Many brands are about to confront the latter in their data buying practices.

Mobile providers sold location data to middlemen in the first place because intermediaries could make the data firehose usable for smaller advertisers. The decision to remove these middlemen means that all but the P&G-sized global advertising behemoths are shut out of location data for the time being. We may see Verizon create its own product to offer location data directly to buyers without the middlemen – but there’s no indication it is heading in that direction.

Brands need to determine the sources of the data they buy. Some brands that thought they were paying for a quality data product may find that those products are about to change or never truly achieved their desired quality to begin with. Since it may be unlikely that brands will get their location data directly from the telcos, I predict much movement and testing across the data vendor landscape.

Location data is incredibly important to the digital marketing ecosystem, especially with ad spend increasingly going toward mobile devices. The telcos’ decision to cut out the middlemen sheds light on important questions surrounding every kind of data used in the ecosystem. It's up to agencies and brands to make sure they are buying data that isn’t compromised.

Follow Dstillery (@Dstillery) and AdExchanger (@adexchanger) on Twitter.

 

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