Telefónica Launches Mobile Ad Exchange

Spanish telecom giant Telefónica has partnered with the investment and advisory firm Blackstone GSO Capital Partners to launch Axonix, a mobile advertising exchange platform. Telefónica’s CEO of Digital Service and Innovation, Stephen Shurrock, said, “We’re proud to be the first telecoms company in the world to own and power a mobile ad exchange platform.” The platform will be powered by MobClix, a programmatic advertising platform, which was recently acquired by Blackstone. The new firm will operate independently of Telefónica and be based in London. The move will allow the operator to compete for the ever-growing mobile advertising sector, projected to grow 50 percent each year to reach US $45 billion per year by 2016. Telefónica has over 323 million mobile customers across 24 countries.

The creation of Axonix is Telefónica’s latest and most aggressive move to tap into more diverse revenue streams and avoid the fate of becoming a “dumb pipe.” In entering mobile ad sales, Telefónica is joining a crowded and competitive marketplace. The leading players, Google, Facebook and Twitter, are household names, with high levels of programming expertise and proven track records of innovation. The growth potential for mobile advertising is as clear to these actors as it is to Telefónica, and they will fight to keep their share.

As it tries to overcome these challenges, Telefónica has three significant advantages. First is its huge user base with verified demographic information. Unlike with PCs, where significant personal information is gathered through cookies, mobile ads tend to employ algorithms that use site visits and preferences to estimate demographic information. Simon Birkenhead, who has been chosen to run Axonix, said, “This is really going to be quite a leap forward for programmatic for mobile because currently mobile advertising suffers from a lack of good quality data for targeting. Yet programmatic media buying is totally reliant on data for it to work.” Second, due to its significant presence in Latin America, Telefónica’s operations pair well with the highest-growth areas for mobile advertising. Unlike North America and Europe, Latin America and Africa are poised to be filled with mobile-only internet users. Third, while Axonix’s platform will almost certainly be used initially for Telefónica’s subsidiaries (the company’s deal with mobile ad platform Amobee is up for renewal this year), it can leverage Telefónica’s relationships with other operators for growth. As a giant in the industry, Telefónica has relationships with virtually every major player, and we expect the team at Axonix to rely on these to help it push the platform as a mobile ad marketplace for other operators.

As we have written before, working to increasingly monetize subscribers’ demographic information without creating the perception of violation of customer privacy is an excellent way for operators to combat declining ARPU. It now appears that Telefónica is heavily invested in making this strategy work.

The above item appeared in a recent issue of The Tarifica Alert, a weekly resource that analyzes noteworthy developments in the telecoms industry from around the world. To access all of the latest articles and issues:  http://www.tarifica.com/TarificaAlert.aspx