Verizon’s big move into mobile advertising and AT&T’s big move into content (especially mobile plans) remain controversial strategies, at least from the perspective of many investment concerns.
Right or wrong, there is a clear logic at work. Mobile revenues increased 89 percent from the first half of 2015 to the first half of 2016, the Interactive Advertising Bureau reports. Likewise, digital video, including mobile and desktop, grew 51 percent between 2015 and 2016.
Digital video revenues generated by smartphones and tablets grew 178 percent, year over year, IAB reports.
As audiences shift to mobile devices, digital video was the only ad format on desktop devices that had meaningful growth, increasing 13 percent, year over year.
The extent to which Verizon can succeed as a mobile advertising platform, or AT&T win as a mobile and over-the-top content distributor, remains unclear to many. What is clear is the strategy.
Both firms operate in content and advertising markets that are large and potentially sustainable. That is not the case in most countries, whose markets are too small to offer scale benefits.
AT&T already is the largest linear video distributor in the U.S. market. And though many have criticized AT&T for moving into linear video distribution in a big way, the company’s leadership is not dumb. They know linear is going to give way to over the top distribution, which is why OTT plans are being developed.
If one accepts the notion that large tier-one telcos will have to replace something like half their present revenue within a decade, and that gross revenue and profit margin protection requires moving “up the stack” and “across the value chain” towards applications and platforms, then both video content and mobile advertising are rational bets for Verizon and AT&T.
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