Startups Put Mobile Carrier Data Into Advertiser Hands

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Telefónica made a big promise of more privacy control for its mobile subscribers last week, announcing a platform called Aura to show them the data they generate as they use its services. The company, one of the world's largest telecom carriers, will also offer incentives—"peace of mind, improved experiences or personal rewards," as a spokesman put it—in exchange for letting it share their data with third parties.

The news matters because mobile carriers around the world are increasingly trying to turn their customer data into a new, powerful tool for marketers. Telefónica and others are already opening certain raw data to companies dedicated to helping carriers cash in on subscriber info. But consumer consent will likely be key if carriers are going to deliver for marketers.

With margins diminishing on their core product—voice and data services for subscribers—telecoms have begun seeking revenue from data about subscribers, said Mark Grether, a former executive at programmatic ad firm Xaxis and an investor in Zeotap, a startup in the space. "So my core business becomes a means to an end," Mr. Grether said. "That's the kind of mental shift that I'm seeing in the telco industry."

Though carriers are in testing mode, the burgeoning telco data sector and millions of dollars in recent startup funding signals a near future in which marketers can capitalize on higher-quality data than they get today. It isn't just quintessentially "mobile" location data: Carriers have names, addresses, bill totals and more. Even though the data is stripped of personal identifiers, it can build rich profiles for ad targeting and measurement.

In a campaign for Mercedes with Publicis Groupe's Zenith España, for example, Zeotap built consumer clusters based on their monthly bills in the hopes of targeting people who could afford the luxury E-Class sedan. Zeotap said it has also recently worked with Publicis on behalf of Samsung and Interpublic Group for Johnson & Johnson, among others.

The startups argue that their access and technology yields consumer information that others can't match. "They're specialists for sure," said Rich Karpinski, principal analyst of mobile operator strategies at 451 Research. "They have expertise in taking this data in and normalizing it and cleaning it up."

Telcos themselves have explored a variety of ways to take more advantage of their data. Verizon, Sprint and AT&T have built divisions to provide marketing insights and enable easy ad targeting of their subscribers. And Verizon's moves to buy AOL and Yahoo are predicated on pumping its data into their ad systems.

Telco data analytics firm Intersec has helped Telefónica and its U.K. carrier O2 put subscribers' location data to use for ads aimed at geofenced areas. The firm also has worked with French telecom Orange and Zain, a carrier serving Middle Eastern countries.

Zeotap's deals with telcos in North America, Europe and India have sparked interest from other players. Smartpipe Solutions says it works with four mobile operators in Egypt, Indonesia, India and the Czech Republic, and is deploying its technology in Britain. Teralytics provides an analytics platform to carriers and helps connect their data with high-tech ad marketplaces or other entities to make revenue from ads, traffic management or financial analytics.

The young guns Zeotap, Smartpipe and Teralytics won't name many or any telco partners. "We are relatively discreet about that," said Smartpipe co-founder Tobin Ireland.

What's no secret is that telcos risk consumer backlash if they don't communicate their data-sharing relationships well. Another challenge is the constraints on incentives they might offer. "We haven't seen many operators yet that successfully built a meaningful opt-in base due to lack of real incentives for subscribers to do so," said Teralytics CEO Georg Polzer. "The operators' core business is still too strong to let them offer, for example, meaningful discounts on monthly contract payments."

Mobile customers typically don't know when carriers do share their data. Zeotap says partners notify their subscribers through their websites, print statements and other means. In other words, subscribers are not likely to get a hard-to-miss notice on their phones. One carrier working with Teralytics offers a discount for subscribers who agree to share the data they generate, though Teralytics is not named, according to Mr. Polzer.

"The telcos should give their consumers meaningful options," said Jarno Vanto, a data privacy and ad tech lawyer at Polsinelli. "The end user, the consumer, is completely out of the equation."

While consumers aren't usually getting what watchdogs and regulators call prominent, meaningful notification, regulations are uneven and a bit fluid. The Federal Communications Commission is likely to become more permissive under the Trump administration. But the EU's General Data Protection Regulation rules coming next year require opt-in consent from consumers before sharing data with third parties. "Our privacy principles are completely aligned with GDPR," the Telefónica spokesman said. "With every third party, Telefónica ensures that data remains secure, privacy is protected, and only the minimum insights are shared with third parties to deliver the service the user has subscribed to."