Telcos can transform the UK ad industry for the better

Opinion

The UK linear ad market business model is broken and positive disruption is needed to ensure its very survival. This is where UK telcos come in.

As a lifelong telecoms and media executive now focused on the UK advertising market, I have been shocked to observe just how old-fashioned, insular and resistant to change the UK linear ad industry has become.

The old boys’ network thrives with the same people year in, year out, focused on preserving the status quo and aggressively resistant to reform.

Industry incumbents are unhappy

The industry’s customers are unhappy.

Advertisers worry about their agency’s motives; they are frustrated by the siloed and complex nature of the wider ad industry that makes campaign management a challenge and the determination of impact hard to achieve.

Media owners are worried about their future and desperately clinging to an outdated industry structure that is actually hurting their prospects.

Media and channel fragmentation has led to large numbers of new players all frustrated by the existing old-fashioned industry and some of its incumbents, like the UK measurement currency that is not fit for purpose.

As a former strategy consultant, it is clear to me that all the signs point to an industry ripe for a paradigm shift.

Enter the UK telcos

Enter the UK telecoms companies: Virgin Media O2, BT/EE, Vodafone/Three and possibly Sky.

To help modernise the industry, we have created a new company called Digital Audience Data Ltd (DAD). It will be run by advertising and adtech experts, but owned by the large UK operators. It will focus on two areas.

First, measurement. Leverage the top four operator network/device data and aggregate data from myriad sources, DAD will create a modern and accurate currency for the UK.

Secondly, leveraging AI ad technology, DAD will seek to provide a one-stop-shop adtech service sold direct to advertisers and ad agencies. By integrating all existing platforms and inventory sources, customers will have a single platform for all linear, online and streaming ad services.

These are lofty goals — many will immediately shout that this cannot be done and that the incumbents will never accept such a service. I disagree: over time, the compelling nature of what we are proposing is actually better for the main players — notably the broadcasters.

Let’s take each in turn.

Like it or not, Barb is not fit for purpose

Measurement is currently managed by Barb and while it has numerous supporters, its more sensible detractors are many. Its panels are old-fashioned and crude; it is astonishing that a multibillion-pound industry relies on such antiquated services that are very often inaccurate.

Yes, inaccurate. Talk to the smaller channels about what happens when a small number of panel members go on holiday. It’s beyond absurd.

Barb is also a monopoly that Ofcom has in its sights.

And, yes, Barb is trying to modernise itself, but being owned by the broadcasters, advertisers will always worry that an invisible hand is tipping the scales.

A new independent currency is needed based on real viewing data leveraged in a modern and sophisticated way to cover in and out of home and activating new in-home tech to gather engagement and other impact metrics at scale. A currency designed for media fragmentation and dispersed audience measurement, designed for any device measurement from the in-home TV to the out-of-home mobile phone, leveraging all data sources as the super-aggregator.

We will better measure minorities, the youth market and other underserved segments. The operators have much of the data and/or access to the data and they have the industry connections to aggregate all sources of measurement data into a compelling new currency that is trusted by all and based on actual viewing at scale.

Defeating complexity and a broken business model

Through DAD, the operators will offer new dynamic adtech services that provide a one-stop shop for advertisers.

Instead of advertisers having to go to several sources to execute a campaign, the DAD platform will provide one easy-to-use system with a compelling user experience and new industry-first capabilities to enhance the effectiveness and ease of campaign execution and management.

Based on advertiser interviews, those that pay for this industry desperately want a capability like this. One top five UK advertiser told us: “It cannot come soon enough.”

For the broadcasters, we believe current agency deal structures are permissive, depressing CPMs, while the client/advisor Hippocratic Oath between advertisers and agencies is fundamentally broken (see Nick Manning’s recent article).

Through a combination of targeting (eg. dynamic ad insertion) and reach capabilities, linear can perform better and CPMs will be higher as advertisers are willing to pay for proven uplift and effectiveness. Broadcasters need to have more faith in the power of their offering — the upside opportunity is far greater than theoretical loss of certainty from lower-value agency deals.

New advanced tech, economics and partnerships

While confidential, we will also leverage new in-home tech provided by the operators to better measure effectiveness in all sectors (linear, online etc) for the first time, providing a robust measurement capability for linear.

We will leverage the interdependent relationships that operators have with the streamers and online giants to integrate all platforms into one interface that advertisers can use. Everyone will benefit.

DAD will also combine the power of targeting (household, by geography etc) with the linear industry superpower: reach. Our tech will optimise the balance between the two with some ads deployed in a highly targeted manner and others deployed across large audiences.

We can do this simultaneously, adjusting by ad, time of day, device type, channel and segment. An optimal mix for maximum returns for broadcasters will be secured by providing a significantly enhanced set of capabilities for advertisers.

Importantly, DAD will also create a new ad channel by combining all the operator retail stores and their estimated 3,000 TV sets in prime locations to allow advertisers to reach the 20m telco customers visiting operator stores each year.

In addition, new operator-managed mobile phone customer apps on the phone will also allow for highly targeted ads to be delivered to the telco customer base — that’s basically the entire country.

We believe the two new DAD core services will be explosive in a good way. It will transform the industry. Without overplaying it, to restructure the UK ad industry requires large players like the operators leveraging their industry scale, good relationships with broadcasters/agencies/incumbents and significant economic heft. No “velvet rope” here.

Broadcasters and advertisers will be better off

At its core, we believe the new DAD capabilities will help most incumbents, notably the broadcasters. We will increase CPMs, better integrate TV inventory into cross-media campaigns and optimise the balance between reach and targeting, thus reducing wastage, improving relevancy and, for the first time, proving linear’s impact.

We will put broadcasters on a level playing field with other forms of advertising and allow linear to show its ability to drive returns for advertisers.

DAD will bring the effectiveness and success of online advertising to linear — this is a seminal moment for the UK industry to embrace change. The first step of change is awareness. The second step is acceptance. The third is openness: being willing to work with out-of-industry players that can help us help ourselves.

Andrew Cole is board member at Liberty Global, which owns Virgin Media O2. He is also a tech entrepreneur and a backer of GB News. Digital Audience Data is intended to become the vehicle through which operators provide advertising services with other DAD entities across global ad markets. DAD is unrelated to Liberty Global.