Editor’s Corner—AT&T risks getting creepy with its ad business

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AT&T is working to grow its advertising business. (Alpha Stock Images)
Mike Dano

Now that AT&T has completed its acquisition of Time Warner (well, mostly, apart from the DOJ’s ongoing appeal), the company is making clear its digital advertising intentions. And they are significant.

“A relevant ad marketplace must be able to reach customers where they are, whether it's a 50-foot screen in a theater or a 3-inch screen in your pocket,” said AT&T’s Brian Lesser, explaining that AT&T will be the company that can reach those customers.

And if that doesn’t start to raise your red flags, Lesser continued: “Imagine a DirecTV customer watching the big screen on their living room wall and, instead of seeing a traditional ad break, they see an icon on a car in a movie that they're interested in or in a show that they're interested in,” he said, according to a Seeking Alpha transcript of his recent remarks. “And then we have the ability to create a seamless ad experience on their mobile device, which is on the coffee table or in their pocket, pause real-time content to interact with a better ad experience and therefore, deliver more relevant content to our customer and to the consumer more broadly.”

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“AT&T has access to expansive datasets on customer behavior and preferences,” Lesser noted. “170 million direct-to-consumer relationships across its wireless video and broadband businesses, 40 million set-top boxes, 20 million connected cars, and that's just for starters. But data needs to be activated to have value. We're building targeting and measurement capabilities that will bring greater value to consumers, advertisers and publishers.”

Now, to be clear, none of this is new, or a surprise. AT&T has long made plain its desire to grow an advertising business by giving advertisers the ability to reach people interested in their products by finding them through AT&T’s demographic information. It’s an effort that AT&T kick-started through its acquisition of DirecTV in 2015 and formalized last month through the creation of its new “advertising and analytics” division headed by Lesser, which recorded revenues of $1.8 billion in the second quarter. And the operation continues to expand: AT&T just last month purchased ad tech company AppNexus for a rumored $1.6 billion.

It’s also the same business that Google and Facebook have made a killing in. Both companies collect data about their users and then use that to help advertisers reach people who might buy their product, given the proper push.

And it’s worth noting that AT&T is aware of the risks it faces in collecting information about people. “We believe customer data cannot be compromised.  This is something we constantly think about and want to improve upon,” the company said on its new “AT&T advertising & analytics” website.

The problem, though, is that AT&T is an internet service provider. Unlike Google and Facebook, which are web destinations, AT&T is a web provider. And because it’s now a wired, wireless and video provider—thanks to its purchase of Time Warner—it’s growing into a “full stack” company (“modern media company” in AT&T parlance) that will be able to know where you are and what you’re doing throughout much of your digital life.

And it’s fair to say that AT&T wants to retain that power. After squashing FCC rules that would have hamstrung ISPs in their data-collection race with Google and Facebook, ISP lobbyists have also reportedly stalled similar efforts at the state level.

And those efforts come amid the fallout of outright leaks of wireless customers’ real-time mobile location information. That dustup, which seems to have largely subsided following operators’ pledges to withdraw from the practice, highlighted the fact that operators continue to view users’ data as a money-making asset.

And that brings us back to Lesser’s business at AT&T. Lesser is a big-time ad guy, having previously headed the North American business of GroupM, the world’s largest media investment management organization. And he’s determined to use technology—including technology leveraging location and demographic information—to grow AT&T’s ad business. "The world needs advertising more than ever. We just need to make it more relevant and make matter for consumers," Lesser told CNBC last month. "Everybody still hates advertising when it interrupts the content. It's our job to reduce the load on consumers, make it a better experience."

The only way to make advertising relevant is to know who is watching the ad. And who knows you better than the company sending a wireless signal into your pocket while at the same time sending content to your TV?

To AT&T’s credit, ad relevance doesn’t mean giving an advertiser a customer’s name, address and favorite website—AT&T’s ad data is anonymized, thereby allowing advertisers to potentially target customers who might sit in a certain demographic or, potentially, who have shown an interest in a particular product or service and in a particular location.

Nonetheless, the point here is that AT&T needs to tread carefully—through its actions, its legislative agenda and its executives’ comments—or it risks falling into the “creepy” category that Facebook is becoming familiar with.

For example, take the response that Lowell McAdam of Verizon gave to a question about the company’s own Oath-based targeted advertising efforts: “First, on customer data, our hallmark on this Tim is transparency; we don't want to use data though—unless customers know how we're using it,” McAdam said during the operator’s recent quarterly conference call with investors, according to a Seeking Alpha transcript of the event. “And so far we've been able to do a broad data analysis and target our advertising not based on individual customer data but overall data. And I think that anonymous usage—we're very clear with customers about, and it's certainly got a lot of value to the old facets.”

After all, a new Parks Associates customer survey found that 20% of U.S. broadband households are “highly sensitive to collection and use of information about themselves and their activities.” That’s a market AT&T can’t afford to upset. – Mike | @mikeddano

Editor's Corners are opinion columns written by a member of the Fierce editorial team. They are edited for balance and accuracy.