Telcos are striving to succeed in digital – this is how they can ensure successful digital transformation

10th May  |  
4 minutes

Last week saw two important announcements from major telcos land on the same day. For Verizon, it was the news that it’s selling its media business, which includes the AOL and Yahoo! brands, to a private equity group. Vodafone, meanwhile, announced that it has formed a six-year partnership with Google Cloud to leverage data analytics to support new digital services for Vodafone customers. 

When Verizon started its digital media spending spree back in 2015, with the acquisition of AOL, it was effectively looking to buy its way into the digital ecosystem. Its goals were to make Verizon Media an online giant to rival the likes of Google, Amazon, Facebook and Apple (GAFA) and to take a slice of lucrative ad sales.  

Buying into the market  

In addition to Verizon, there are other examples of telcos that have attempted to buy into the existing digital media ecosystem and ad tech structure only to find they are late to the party.  Telenor’s acquisition of Tapad, for example, was reversed after fewer than five years.  

Trying to integrate separate companies with different propositions is difficult. Not only do the business models vary, but the basic systems on which the companies operate are unlikely to be interoperable. Any such acquisition therefore requires lengthy and complex integration efforts before value can be realised. It’s little wonder telcos struggle to make their vertical acquisitions deliver. 

Partnering into the market 

Vodafone’s recent partnership extension with Google Cloud is a focused attempt to increase its digital offering to customers – essentially betting the “family silver” of its subscriber data on the hope that Google Cloud’s scale and analytics capabilities will drive compelling digital services.  

Only time will tell how successful this initiative will be, but one immediate concern with such partnerships is that they fail to deliver the disintermediation telcos desire. For that, telcos need to build service layer solutions of their own without aligning to the big tech platforms.  

By partnering with the likes of GAFA, telcos run the risk of giving even more power to these companies, which in the long run may harm telcos’ interests. Telcos want to innovate in the digital realm, but increasing their dependency on third-party, US-led tech giants can work against independent advancements in a highly competitive market. 

Start with the network 

Instead of relying on acquisitions or big tech partners, operators can instead leverage their own innovation capabilities and resources and build propositions that are based on their core strengths. Telcos have immense capabilities in the form of infrastructure and customer knowledge that can form the basis of winning services for their own use and the greater digital media market, especially when it comes to content personalisation for programmatic advertising.  

Spending millions on enhanced product and service offerings and content creatives to gain market advantage is weakened if you do not put in the same drive for independence in your delivery of the message. Relying on the same data platforms and using the same ID’s, supply and infrastructure as your nearest competitor will not deliver market advantage.  

Telco’s can innovate from within to reach both new and existing customers and possibly create lucrative new revenue streams by building out their own in-network first-party verification ID. Using privacy-safe telco information, the telco and third-party brands can confirm audience IDs, across both authenticated and unauthenticated users, cross-device, and on the open web to provide marketers with addressable, real-time audiences at scale.  

In this approach, the telco is in full control of the service and only draws on partners to provide technical enablers for the service. For Internal use they create and retain control of their own ID, guarding against increasing the capabilities of the same platforms that serve their nearest competitors. 

Telcos have rightly identified the digital media market as a ripe opportunity for growth. The task now is to find the right approach into this market – one that delivers value while retaining control. Clearly, service-layer propositions that leverage the full value of existing telco capabilities are the best way forward.   

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