A year from now, AT&T will be a very different company. Barring regulatory blockades, it will own DirecTV and two newly acquired Mexican telecoms. And, by then, the No. 2 national carrier may be known as much for gadgets in people's homes and cars as in their pockets. During the fourth quarter, AT&T added 1.3 million connected devices, including 800,000 LTE connections within vehicles, payoff from its entry into smart-home technologies.
The quarter also illustrated just how rapidly the wireless industry is changing. AT&T used promotions to combat offers from rivals T-Mobile and Sprint. Customer turnover rose; profits margins fell. And excluding tablets, the carrier lost around 100,000 phone subscribers.
As CMO of AT&T Mobility, David Christopher is tasked with helping the company adjust to this new landscape for wireless carriers. At his disposal is a big chunk of the nation's second-largest ad budget -- $3.3 billion in 2013 for all of AT&T -- some of which is going toward untested digital platforms like Tumblr and Snapchat. He spoke with Ad Age about the shifting digital world, marketing the Internet of Things and why he doesn't focus on noisy competitors. The following transcript has been lightly edited for brevity and clarity.
Ad Age: You launched Digital Life [a connected home service] in 2013 and have added connected car partnerships, but have yet to advertise them heavily. How do you market the smart home and connected cars?
David Christopher: We are extremely excited about the ability to connect your home, your car, your wearable and myriad other devices. And we believe that the smartphone is the remote control of your life. It all runs on a network. Customers need a trusted brand to help them navigate these brave new worlds. Most customers don't know they can control their home with their smartphone, or they don't know they can connect their car to the mobile internet with their smartphone. And that's where AT&T comes in. Cars are going to be smartphones on wheels.
We have recognized this opportunity for years. Consumers need help to understand the benefits.
Ad Age: These new markets, particularly connected cars, involve several partnerships. Will you be doing more cobranded marketing?
Mr. Christopher: We'll see. We've done a lot of things to put ourselves in a good position. We're working with GM, Audi, Subaru, Tesla and others. Even before that, we put the pricing platform in place to really make the user experience easy. You can add a car to your account for $10. And it is a great, easy experience.
If you go into our stores, we just changed the messaging to: "the smartphone is the _____ to your life." We're seeding that idea that the smartphone is much bigger than just the device itself. That's where we're starting, and we're going to start storytelling around this to communicate all of these benefits in 2015. We'll go from there. It's still a nascent market.
Ad Age: What's your approach to digital marketing? And how do you leverage "big data" for it?
Mr. Christopher: Digital is multimodal: It's everything from search to display to direct digital, which is quickly supplanting direct mail as a super-exciting way to reach customers. Data drives that. We've spent a lot of time over the past few years over advanced analytical capabilities, so that we can be highly relevant, highly direct. And we're only going to grow those capabilities. That's going to get more of our advertising dollars.
We're not afraid to experiment. I look at all of these things as experiments. Some of them are going to cross over into mass marketing; some of them won't. We're constantly pushing ourselves to where our customers are. We have to be there.
Ad Age: You've been investing in your own digital properties -- the majority stake in Fullscreen [a YouTube network]; and your CEO has hinted at using an over-the-top service with DirecTV. Will they be a bigger part of your digital budgets?
Mr. Christopher: Our consumers want video. They want relevant content when they want it. If some new platform emerges, we're going to be on that platform. Past new mediums that are now mainstream -- they deserve a significant part of marketing mix.
Ad Age: Do these mediums replace broadcast TV in the marketing mix?
Mr. Christopher: We're constantly optimizing our marketing dollars.
Ad Age: The wireless industry is extremely competitive right now. Are you focused on the new promotions from competitors?
Mr. Christopher: We want to play our game. We have an extremely strong value proposition, across a great network, great value -- and that is changing to where the future is going, on home, on cars. We are aggressively moving to where the customers are going to be. Some others are one-dimensional. We're playing our game, and we're excited about the potential.
Ad Age: Two of your competitors, Sprint and T-Mobile, took to the Super Bowl. Any reason you stayed out the game?
Mr. Christopher: We're always looking at exciting new platforms and where best to put our spend. And I'll just leave it at that.