Phone Giants Roll Out
‘Three Screen’ Strategy
And Ads to Be Served
On TV, Cellphones, Web
June 26, 2008; Page B7
I suspect I can’t claim to have been misquoted here but I WAS partially quoted. What did not make the piece was the next sentence…..”As penetration of telco TV services increases their offer will be compelling but right now the content owners with multi-screen distribution are in the stronger position.” Oh well.
The nation’s largest phone companies sell packages of wireless phone service, Internet access and pay TV to consumers. Now they’re taking integration one step further, airing video programming — and selling ads — across all three platforms.
Content and advertising deals used to be struck separately for each platform. But Verizon Communications Inc. and AT&T Inc., for instance, have cut deals with media companies that allow them to distribute programming — from “Saturday Night Live” clips to user-generated video — to cellphone, broadband and TV customers. Recently, the phone companies have begun to sell ads across all three screens. They’re also rolling out features that link the units, such as Web-based transcripts of cellphone voice mails.
This integration, still in its early stages, is part of a broader plan to generate revenue from new services as wireless growth — the engine of the telecom industry — is beginning to slow. Both AT&T and Verizon, the majority owner of Verizon Wireless (Vodafone Group PLC of the United Kingdom owns the rest), are pursuing this “three-screen” strategy — showing ads and content on the screens of cellphones, computers and TV sets.
In May, AT&T tapped regional wireless executive Brian Shay to head a new division devoted to “converged services.” In addition to handling content-licensing discussions, Mr. Shay will develop technology to display ads on all the platforms, beginning with a rollout of a mobile ad-serving system in the fourth quarter, according to people familiar with the matter.
Last year, Verizon promoted longtime wireless executive John Harrobin to lead a new three-screen content-and-advertising unit. He negotiated a recent deal with General Electric Co.’s NBC Universal to show three- to five-minute “Saturday Night Live” clips on cellphones, on FiOS TV’s on-demand service, and soon on the carrier’s broadband portal. Verizon has begun running ad campaigns on the three platforms, including a recent Burger King campaign. “This is the beginning of much more cross-platform activity,” says Mr. Harrobin.
One hurdle: Phone companies’ nascent TV services and Web portals may not have enough users yet to draw major advertising campaigns. And the phone companies have to compete with other groups that want to sell ads and deliver content across multiple channels. Microsoft Corp., for instance, aims to become a one-stop shop for advertisers to buy spots on the Web, on mobile phones, in videogames and on TV. Cable-TV operators too are making significant investments in wireless, partly to position themselves to deliver content for TV, broadband and mobile.
For the phone companies, the effort comes as growth in wireless-subscriber numbers — which in recent years has more than offset declines in traditional landline subscriptions — is slowing as the cellphone market nears saturation. Ad revenue could provide a fresh source of growth. The telcos also believe that customers who consume content or services across multiple platforms will be less likely to switch providers.
But some marketers are skeptical that phone companies have any real reach beyond their large mobile-subscriber base. While Verizon has 67 million cellphone customers (and will have 80 million or more if its acquisition of Alltel Corp. is approved), it served just 1.2 million FiOS TV subscribers in the first quarter. AT&T, similarly, has more than 71 million cellphone users but only 379,000 U-verse TV customers. Both have millions of broadband customers, but their portals, att.net and verizon.net, draw relatively few visitors.
“Integration of anything depends on the weakest link of the integration. It is like a stereo system: If you have a $10,000 stereo but 100-buck speakers, you have a 100-buck sound,” says Rob Norman, chief executive of GroupM Interaction Worldwide, part of WPP Group PLC. GroupM encompasses all WPP’s media businesses, including media-buying agencies MindShare, Mediaedge:cia, Maxus and MediaCom, which represent nearly $50 billion in annual global ad spending.
For that reason, some Madison Avenue executives say advertisers looking to buy space in different media might be better off sticking with separate companies that specialize in each platform, at least for now. In the long run, they say, phone companies could gain an advantage by creating sophisticated ad-targeting systems that adjust which ads run each time a user views them in a different medium.
The phone companies have had some success. Burger King’s three-screen ad campaign with Verizon earlier this year built on the fast-food company’s “Whopper Freakout” TV ads, in which customers were told the burger had been taken off the menu and their reactions were filmed. (The ads were part of an effort to demonstrate customers’ loyalty to the burger, which is still on the menu.) Brian Gies, vice president of marketing impact at Burger King Holdings Inc., says the results were positive, but didn’t give details of how often the ads were viewed or clicked on. Burger King hasn’t done any similar deals since.
Among the “Saturday Night Live” clips Verizon offers is one from Weekend Update, a fake newscast featuring a fast-talking travel reporter who utters the phrase “just kidding” with annoying frequency. J.B. Perrette, president of digital distribution for NBC Universal, says “Saturday Night Live” was a natural choice for the multiplatform strategy because the material can be presented in short bites. “It hits the sweet spot of the digital consumer,” he says.
The next challenge will be developing new technologies that link all three platforms, says John Donovan, AT&T’s chief technology officer. For instance, the company is working on a system to coordinate digital purchases so that when a customer buys a movie on his laptop, it’s instantly available for streaming to his cellphone and on-demand on his TV.
“That part of innovation is the easiest to conceptualize but the hardest to produce,” Mr. Donovan says.
–Emily Steel contributed to this article.
Write to Amol Sharma at firstname.lastname@example.org