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NEW YORK The telecom sector is traditionally one of the biggest consumers of media, to be sure. Now—as if the broadcast TV networks didn’t have enough competition to worry about ahead of this year’s upfronts—telecoms are fast becoming a major producer of media as well.
AT&T, the nation’s top telecom, began this year by announcing plans to become a major force in advertising sales. By selling ads over its wireless network, AT&T plans to reap billions per year in the coming years.
Other players have not been as bullish on mobile ads as a revenue stream. T-Mobile, for one, does not currently offer ads over its network, while Verizon and Sprint have likewise been resistant to the idea.
One major reason: ads are seen as potentially a major nuisance to paying subscribers. A recent Forrester Research report found that 79 percent of U.S. consumers were “annoyed” by the idea of mobile marketing.
Anita Newton, vp, strategic and digital marketing at Sprint Nextel, says her company is wary of irking its customers with such ads. “Our phone’s not going to become a billboard in your pocket,” she affirms.
Nevertheless, as the TV networks attempt to run their programming on cell phones, it’s conceivable that they will cut deals with the telecoms at this year’s upfront that involve bartering media on some level.
For the most part, runaway multimedia ad spending by telecoms will likely continue as Verizon, AT&T, Sprint and T-Mobile keep battling each other, mostly over the same customers. “The same ad dollars are fighting for the same amount of people,” says Roger Entner, an analyst with IAG Research, New York.
All the attractive customers, those who pay their bills on time and who tend to rack up big charges, signed up for cell phone service long ago. So, aside from chasing the credit- challenged, the underage and the elderly, there’s not much else to do but try to poach other companies’ customers. That requires, as always, more advertising.
When Sprint announced an agency review in January (Goodby, Silverstein & Partners, San Francisco, eventually got the assignment), the company promised “significantly increased media-related spending” this year—to the tune of about $200 million. Newton declined to say how much of that would go into TV, but admitted the company looks at TV differently these days. Sprint is “content planning,” he says, so that “compelling content resonates with the target audience regardless of the screen.” The most recent example: In the Motherhood, an online forum in which moms can post videos of themselves discussing their most embarrassing maternal moments. Sprint is buying TV time—not in prime but in daytime, on the syndicated Ellen DeGeneres Show—to direct viewers to the site, part of a growing trend in which Internet is the center of a campaign while TV serves mainly to drive traffic to the Web.
Sprint’s promise to boost spending comes after another year of growing outlay on TV in the category. According to Nielsen Monitor-Plus, all the major telecoms increased their spend last year, with Verizon up 12 percent to $1.7 billion, AT&T up 10.4 percent to $1.6 billion, Sprint up 7.8 percent to $1.2 billion and T-Mobile up 14.2 percent to $570.9 million.
The only wild card: Vonage, which upped its ad spend 443.7 percent last year to $86.1 million. Analysts have been saying for some time that Vonage’s ad investment has been out of proportion with its revenue. Facing a nasty patent fight with Verizon, Vonage has announced it will slash ad spending this year by $110 million.
Meanwhile, telcos have stepped up their broadband offerings, including a cable-like TV service, but only in select parts of the country.
The marketing strategy on that front so far has been town to town rather than via national ad buys. In fact, it’s not unusual to be approached by a door-to-door salesperson for a telco and a cable firm if you live in a town that offers TV and broadband service from both.
Until now, the cable players hadn’t resorted to marketing because they didn’t have any competition. That may change over the next few years, as more homes are eligible to receive telecom-based TV. In the meantime, the telcos’ strongest asset over cable companies is the ability to include wireless service into a bundle of services. Based on recent and projected ad spending figures for wireless, the telcos will keep pressing that advantage for all it’s worth.
