Wednesday, January 9, 2019

Why Can Mobile Leverage Its Data to Add Revenue?

People tend to understand that mobile and other service providers have mined their data to improve operations. The next question is where, and whether, they can leverage customer data to create revenue upside. 

Xandr and Verizon Verizon Media Group provide evidence that at least some telcos believe they can leverage data to support advertising revenue streams. Just how successful they might eventually be is yet open to question, as app providers lead the digital advertising business.

In the U.S. market, for example, it appears internet service providers ISPs can record and sell customer  browsing history, data on which apps and services are used. How valuable that might be is among the questions one might ask, in the same way that one might question the value of call detail, in an era where most of the insight is related to internet content behavior.

Telcos process and possess lots of data. But some might question how much data telcos actually can use to support advertising and marketing services, given privacy regulations and the sorts of user actions they can track.

There seems to be less doubt about ability to use some of that data to improve operations. AT&T has mined data for years to wring business value on the operations side of the business (network management, fraud detection, perhaps churn management, customer service). What seems less clear is whether there is significant revenue-affecting upside.

Obviously call detail records, mobile location and data related to customer use of internet access services is the potential mine for revenue-generating or revenue-impacting value.

The issue is how much granularity is available for the internet and app use parts of the data mine, compared to calling or text message behavior.

In developed countries, most people are online daily. By some estimates, 78 percent of customers are online everyday, but telcos typically reach less than one percent of people digitally on a daily basis.

Most Europeans use the mobile internet daily. But one might question how much of the total digital footprint is accessible to mobile operators, compared to app providers, mobile phone suppliers, operating system and other participants in the internet ecosystem.

It would be fair to say that Xandr and Verizon Media Group have some obvious advantages, including direct customer relationships and advertising inventory (linear video and digital content assets).    

To oversimplify ownership of digital footprint, Google knows your location, the content of your emails, your search terms, in some cases your contact list and calendar, and websites you visit.

Facebook knows who your friends are and has some idea of what you like. Amazon knows what you buy. So do credit card companies and other financial institutions.

So as connectivity providers look for some way to leverage their own digital footprint assets, what have they got? Your location; who you call and text, who calls you, and sends you messages; what websites you visit and some high-level details about what content you consume.

In addition, AT&T, the largest provider of linear video subscriptions in the U.S. market, has local advertising inventory that it can sell, as well.

How valuable that data might be, and how it can be used, are questions, though. Up to this point, many telco data mining efforts have focused on operating problems such as fraud, not revenue generation.

Generally there are limits on mobile data retention that limit how long such data can be kept, as well as laws on use of that data. But privacy rules might prevent the mining and application of such data.

That noted, some telcos believe they can leverage data to support advertising businesses, especially related to local tV advertising, using set-top-box viewing data, for example.

Perhaps the more challenging issues are ways to monetize mobile traffic, web browsing and app usage, supplying insights to potential partners, for example. In a smaller number of cases, mobile operators might own content assets where insights can be applied directly.

Greater restrictions are likely going to be considered on use and retention of data possessed by application providers as well.

The point is that mobile service providers--in principle--might be able to leverage location, calling circle and website visit details to create algorithms useful when building an advertising business, for example, consistent with privacy rules that seem to be getting more stringent.

But there are some important limitations. Mobile operators capture three main kinds of information: devices connected to the network, metadata about the packets of data that run through the network, and information about the content contained in the packets being downloaded or uploaded.

But most of that data is not personally identifiable. That might limit the ability to target advertising or content to specific customers, but does allow for creation of larger algorithms about behavior in general.

One might question the value of metadata (details such as the origin and destination of the packet, whether or not the packet contains data from a real-time service like VoIP, and the amount of data in the packet.

The header gives the operator a rough idea of what the content is for, without disclosing any actual details of the content itself.

Still, it is hard to envision, at the moment, how much of the mobile and digital footprint Xandr and Verizon Media Services might be able to leverage, aside from offering local advertising inventory in a relatively traditional sense.

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