Commentary

AT&T/Time Warner Merger: Opportunities And Potential Piftalls

To be sure, by now, most of the prognosticators have weighed in on the proposed $85.4 billion merger of two media and tech giants—AT&T and Time Warner—including RTBlog and its sibling newsletters like PolicyBlog.  

The merger, if it passes regulatory scrutiny, has the potential to disrupt the entire media industry.

Why? Because a combined company would own content (and lots of it), a digital distribution infrastructure, cross-device data intelligence on consumer behavior, and addressable advertising technology. And that’s just the beginning.

In a Quick Take on Oct. 25, Jim Nail, principal analyst at Forrester, characterized the mega-merger as building on “AT&T’s broad reach, deep digital and mobile connections, and ad targeting capability.” Nail cited AT&T’s 25 million pay-TV subscribers and its status as the largest multichannel video programming distributor (MVPD) in the U.S. “Add to that 14.2 million broadband and 133 million wireless customers in the U.S., and AT&T has a strong distribution capability and reach that advertisers want,” Nail wrote. Plus, the company’s AT&T AdWorks division, which absorbed DirecTV’s innovative addressable TV capabilities, “gives advertisers both individual and audience-based targeting options.”

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Ad Sales, Data-Rich Bonanza

The impact of such a merger is a fun source of parlor game speculation. What does it all mean? Here’s one aspect that hasn’t been discussed that much: the impact on the companies’ ad sales teams. That is, the people who sell advertising directly (those who sell linear TV) will have a chance to tap into the early experience gained from Time Warner’s Turner team and combine that with the experience on the AT&T side via its DirectTV/DISH venture on political spending, according to Matt Prohaska, CEO and principal, Prohaska Consulting.

This could be a potent combination in terms of experience. “Once everyone is coached, this should be one of the more sophisticated players to take to the market, when you combine branded content, true addressability, wireless data, and front-end data from satellite TV services,” Prohaska said. “The challenge is that there are a lot of assets to unpack when it comes to understanding online and offline data and how it will be stitched together in a more deterministic way.”

Prohaska maintained  that the combined companies have the potential to form one of the largest deterministic ad platforms in all of television when combined with second- or first-screen data from wireless devices. Apart from that, they’ll also have the ability to offer more video streamed on mobile devices. Essentially, mobile devices become first screen for TV viewing, and many consumers already use them this way. Then the combined companies will "have the ability to target at scale with appropriate reach and frequency like never before,” Prohaska explained.

Genuine Addressability, Cross-Promotional Heft

Another opportunity the merger could bring is genuine addressability at scale. If it’s truly achieved, this means advertisers will have the opportunity to better understand their customers and improve their targeting. In addition, there is more potential for dynamic creative optimization, or the ability to change, tweak, and tailor creative in real time with a large ad buy.  

Prohaska said the prospect of genuine addressability via the use of first-party data is much better than with most publishers that use data-management platforms. The ability to have the desired reach and frequency with dynamic creative targeted across multiple screens may happen more easily. And presumably, the combined companies will have agile dynamic creative optimization platforms at their disposal on the buy side, or they could develop or acquire one of their own.

In addition,  a combined company would bring a plethora of ideas about the cross-promotion of content. For example, think of Time Warner’s sports franchises and original programming (Turner Sports, CNN, etc.), and AT&T’s March Madness franchise. There is potential in extending these franchises and customizing ad packages and products, which “should have a lot of ad products leaders and sales development strategists licking their chops to be able to combine the assets beyond just an AT&T sponsorship of an event,” Prohaska opined.

Even before the regulatory process begins, “I’d be starting to align the audience assets,” Prohaska said, “and from a sales standpoint, I’d be looking at what the buyer landscape looks like. For example, I’d have the products and analytics teams working on where all the assets are and the insights on how people can be targeted in different ways—probabilistically and deterministically.”

There, are of course, some pitfalls such as the potential for overpersonalizing dataor—as Prohaska puts it, the “creep factor.”

Tomer Sade, CEO and founder of Wise Data Media, cited the massive scale of Time Warner’s content brands, coupled with AT&T’s portfolio of mobile and broadband services, and its DirecTV service. The scale enables targeted advertising options. For example, different households watching the same program could see different ads across platforms. “Also, the insights from data across TV, mobile, and desktop will allow AT&T and Time Warner to offer relevant and valuable advertising with premium content. It will make over-the-top TV (OTT) and TV Everywhere more accessible and personalized, Sade told RTBlog via email.

Over-the-Top Potential

Forrester’s Nail noted that the merger clearly plays into AT&T’s OTT goals. He maintained that the deal would “strengthen AT&T’s announced over-the-top TV service DirecTV Now that is set to launch [in November]. With Time Warner, AT&T gains HBO and its one million HBO Now OTT subscribers. With networks including TBS, The CW, and CNN, DirecTV Now will have an appealing content foundation to compete with other OTT offerings such as Dish Network’s Sling TV and Hulu’s service set to launch next year.”

Where addressable TV and programmatic TV are concerned, Wise Media’s Sade maintained that under the combined umbrella, a merger would create new connections between Time Warner content and its TV services; he cited the combination of data and popular content.  

Implications For Ad Tech

Nail also pondered what the merger means for ad tech amid massive disruption in the advertising sector. He wrote: “Mastering the idiosyncrasies of TV ad sales is challenging enough, but the industry has entered a period of upheaval: shrinking audiences, new targeting capabilities, and cross-device planning.” Taken together, these trends all “confound traditional TV planning processes.” Nail noted that “AT&T has strengths in assembling a cross-device profile of individual consumers and leading advertisers into the addressable advertising world. But it will require investment in its ad-tech stack and patience with advertisers who are reluctant to let go of fading legacy ad models and fearful of embracing new models they have no experience with.”

And with that, Nail definitely hit the nail on the head.

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