Turner inventory will soon be available through the AppNexus ad platform, AT&T top dog Randall Stephenson said at an event Wednesday.
Speaking at Goldman Sachs’ Communacopia conference in New York, Stephenson also told attendees how he hopes to expand HBO viewership and said that federal authorities must codify rules around privacy and net neutrality.
Advertising is part of a three-pronged business at AT&T that includes its traditional communications business and its WarnerMedia content division.
While that acquisition of Time Warner is still being appealed by the Justice Department, AT&T is pushing ahead full-bore, Stephenson said.
Here are some additional highlights.
Why AT&T is bullish about addressable advertising
“We have stood up a small version of this [advertising] business before we ever acquired Time Warner-AdWorks in AT&T.
“AdWorks takes the advertising inventory in DirecTV and U-verse. When you negotiate with someone like CNN to distribute content, you agree to pay X, and in exchange for X, you put their content on your platform. And you will get two minutes per hour of advertising inventory. CNN will have 14 minutes per hour. We get two minutes that we can take to market and sell.
“So in DirecTV, we have a little inventory. It’s not too big. But think about our linear TV business. Subscribers are in decline and moving to OTT. They’re declining 2-4% year over year.
“Yet our advertising business, tied inextricably to those subscribers, grew last year at 16%. That’s a $2 billion business that came out of nowhere.
“How did we grow that business? We have all this data: mobile data, location data and viewership data on our customers – we get their permission and they allow us to use it. We go to advertisers and we sell that inventory using that data.
“I will confess: We are not very good at this. We don’t have sophisticated technology to do this. We didn’t have any great advertising executives to step in and run this business.
“But AT&T, going into this on our own, has stood up very quickly with a little bit of advertising inventory, a business that is growing 16% year over year.
“That’s an amazing situation.
“Now, bring in the Turner inventory, which is three times the inventory we have in DirecTV. Add technology like AppNexus and the ability to build a programmatic platform to do mechanically what we’re doing in the back office like the Wizard of Oz, in a very kludgy fashion.
“If we can pull this off, this is a very sizable opportunity.
“Does it cannibalize Turner advertising revenues? I hope it does. I hope it cannibalizes the devil out of those revenues at much higher yields than what Turner is getting.”
Turner is already using AT&T data – and its inventory will soon be on AppNexus
“We have the [AT&T] data available, just not the programmatic technology ready to go.
“But we’re letting Turner use this same data to monetize their advertising inventory today. We expect you’ll start seeing yield improvements on Turner on the margin as we go through the course of this year.
“Over the next 12 to 18 months, as we stand the programmatic capability up, we want to start funneling Turner advertising inventory through the programmatic platform and generate much higher yields on that Turner advertising inventory than they’re getting today.
“It will take a lot of time before things like NBA inventory is sold through a mechanism like this. But the long-tail advertising inventory, which is not inconsequential, will be monetized in the next 12 to 18 months through this platform.”
AT&T wants people watching HBO year round
“John Stankey, who runs WarnerMedia, is stepping up the investment in content to make sure we have a more robust cycle of content coming throughout the year.
“Right now, it’s very concentrated. You launch ‘Game of Thrones’ and it’s Sunday night viewership. You have customer patterns that come on for ‘Game of Thrones’ and go off when the season isn’t in full go.
“This is not trying to get to Netflix’s level of content investment on HBO itself. We just want to fill out the schedule.”
AT&T will leverage WarnerMedia to go D2C
“There’s an amazing library inside WarnerMedia that hasn’t been put to work, but that’s available for direct-to-consumer distribution.
“John Stankey is working on a new direct-to-consumer model that he’ll be announcing in the fourth quarter that brings to bear all the assets AT&T has.
“HBO can be core to any of this. But build around direct-to-consumer experiences that bring in Warner Bros. intellectual properties and all the sporting programs you can surround it with as well. We’ll give more detail on the strategy in the fourth quarter.”
Feds need to figure out net neutrality and privacy
“Congress really needs to act. Privacy being the one that’s most pressing right now.
“You have states engaging in privacy and passing laws to dictate the privacy rules around customer data use. Those rules are important and it’s important to codify those.
“It’s important that it not be done 50 different ways by 50 different states. And the EU is a totally different animal. I don’t even know how companies like ours, or Facebook or Google, could even operate in an environment like that. The need for legislation is pressing and we believe it needs to happen at the federal level.
“There’s effort afoot to make that happen and I think the folks in Congress understand the importance on this.
“There should be one cop on the beat – not the FCC and the FTC – we think the FTC needs to own it for everybody.
“But having 50 different states with different rules is not a recipe conducive to growth.
“With net neutrality, [former FCC Chairman] Tom Wheeler and President Obama’s administration swung the pendulum way over here. President Trump and Chairman [Ajit] Pai come in and the pendulum swings way over here.
“How do you operate in an environment like this? The states are also engaging. California has passed legislation for net neutrality. Other states are also passing it.
“We’re looking at 50 different rules for net neutrality.
“And what’s interesting here is that most players in the industry, whether tech, communications or media, agree: We need to have rules that say no blocking, no throttling, no prioritization of content.
“We need those rules in place and they need to be codified in legislation.
“If we don’t take this on, it becomes a constraint on capital investment, business model development and how people in tech think about investment.”