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Sprint Partners With Telefónica to Form Mobile Ad Network

Mobile Carriers Under Pressure to Ad Revenue Streams

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Sprint has partnered with European telecommunications firm Telefonica to create a mobile ad network spanning the U.S., the U.K., Germany and Brazil. The joint venture will seek out global brands looking to reach the network's more than 370 million mobile users.

For both companies, the agreement is an attempt to establish a new revenue stream by collecting user data and in turn offering mobile display ads targeted to users' demographics. The network plans to build a taxonomy of users based upon apps and mobile websites they traffic. Users then could potentially be placed in categories such as "urban jetsetter" or sports fanatic, Dan Polk, Sprint's director of New Ventures, said.

The network will also attempt to offer a combination of geo-fencing and SMS or MMS messaging to attract advertisers. Those attending a soccer--or football, depending on where you're reading--game might be served an ad for a nearby restaurant upon entering the stadium, Simon Birkenhead, Telefonica Digital's director of global advertising sales, said.

Revenue earned from the network will be split among the Sprint and Telefonica based upon how much of each company's ad inventory is being used for a particular marketing campaign. Both companies declined to comment on specifics on the deal, however.

The companies added they will make data collection entirely opt-in so as not to worry customers vigilant about protecting their mobile phone data.

"We can't risk jeopardizing the relationship with our customers and our core competency," Mr. Polk said.

This is of particular concern for Sprint and Telefonica considering the network will include Europe where mobile data collection is perceived as being more invasive than in the Americas.

Mr. Birkenhead said that attitudes toward mobile data collection differs between European countries. The U.K. is more receptive to the benefits of targeted mobile ads, he said, while Germans tend to be more sensitive to it. Thus, the companies have both vowed not to collect any data on users who decline the opt-in.

The network is the brainchild of the two companies' recently developed digital innovation divisions. In October 2012, Sprint founded Pinsight Media+, a department focused on exploring new business opportunities for the struggling telecom. Telefonica, meanwhile, had a similar division in digital startup incubator Telefonica Digital. The two groups eventually agreed to use each other's mobile carrier inventory to establish a mobile ad network extends across three continents.

"We've been in a cost-cutting, efficiency motive in the last two years," Dan Polk, Sprint's director of New Ventures, said. "There's a movement for carriers to begin looking for revenue, primarily in digital services."

While research firm eMarketer projects U.S. mobile display ad spending to increase by 82.8% from 2012 to 2013, many are skeptical about the effectiveness of such ad impressions. Mr. Polk said that the network will help fix that .

"The reason you've seen concerns regarding the efficacy of display is because the targeting hasn't been there on mobile," he said.

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