Verizon vs. AT&T: Blistering Battle Raging Over Map

Coverage Fight Is Good News for Shops, Media as Wireless Giants Square Off

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SAN FRANCISCO (AdAge.com) -- There hasn't been much good news for BBDO and McCann this year, the No. 1 and 2 U.S. agencies having suffered even more than some of their peers, in part because of their exposure to troubled automakers Chrysler and GM. But the year is ending with a little boom for both as they find themselves at the center of a big-bucks marketing battle that's already threatening to make the cola wars look like child's play.

AT&T spots star Luke Wilson as a likable everyman refuting Verizon's claims.
AT&T spots star Luke Wilson as a likable everyman refuting Verizon's claims.
The combatants this time around -- in case you hadn't noticed -- are Verizon Wireless and AT&T, the respective No. 1 and No. 2 U.S. wireless carriers. That's the nation's second-largest advertiser (Verizon's marketing war chest is $3.7 billion), up against the third largest (AT&T spent $3.1 billion last year according to the Ad Age Datacenter). Those budgets dwarf Coca-Cola's $752 million or even PepsiCo's $1.3 billion.

Though this year has seen a huge uptick in attack campaigns from the likes of Domino's, Campbell Soup and more, the fresh feud between two of the country's biggest carriers comes with ferocity unmatched by those others. The drama has drawn continuous coverage in tech blogs, and now with heavyweight Apple in the mix (the company last week joined the ad fray, going to bat for its iPhone-exclusive carrier AT&T) the passionate audience weighing in from the sidelines will likely grow.

Based on a search for "AT&T" and "map" on Twendz, which measures real-time sentiment on Twitter, on the afternoon of Nov. 24, 43% of the conversations were neutral, 41% were negative and 16% were positive. "Verizon" and "map" generated conversations that were 39% negative, 39% neutral and 23% positive. According to Oneriot, posts about the Verizon-AT&T duel were shared hundreds of times; entries about Apple's new ads supporting AT&T on a popular outlet such as Mashable were shared more than 3,300 times.

"While people may prefer one brand of soup or drink to another, there's a lot more at stake with mobile carriers," said Jeremy Toeman, a partner at marketing consultancy Stage Two Consulting. "In general, few people seem truly pleased with their carriers ... [and] when consumers are seeing the carriers attack each other, there's enough to get them to rally at a personal level."

AdAge.com's ad war roundup
"Take That, iPhone: Verizon's Map for That Ad Goes Viral," Oct. 15, 2009

"New Verizon Ads Take Direct Aim at iPhone, But What Are They Selling?" Oct. 19. 2009

"AT&T Sues Verizon Over 3G Network Comparison in TV Ad," Nov. 4, 2009

"AT&T Missteps With Verizon Ad-Claim Lawsuit," Nov. 9, 2009

"Verizon Exiles iPhone to Island of Misfit Toys for the Holidays," Nov. 16, 2009

"Verizon Wins Round 1 in Legal Spat With AT&T," Nov. 18, 2009

"AT&T's Verizon Lawsuit Gives 'Map for That' Ad New Life," Nov. 19, 2009

"AT&T Strikes Back at Verizon With Its Own Comparison Campaign," Nov. 19, 2009

As the players bet their future on upselling data services, the promise of bigger and faster networks will come to mean something. Aggregated data-service revenues for U.S. carriers grew 27% last quarter from a year ago, with Verizon and AT&T accounting for 80% of the increase, according to Chetan Sharma. Next year, Chetan Sharma expects 2010 data revenue to rise 20% and voice to decline 10% from this year's levels. And as the industry transitions to data from voice, carriers must make sure they squeeze out enough returns to enable them to fund the billions of dollars required to upgrade their networks and ramp up 3G coverage.

Market share counts too, and thanks to the iPhone, AT&T has kept Verizon within sight, with a 29% share that's three percentage points behind the leader. Verizon is adding new customers at a slower clip than its rival, netting just over a million new-contract subscribers last quarter, compared to AT&T's 1.4 million.

Churn has climbed steadily at Verizon as customers leave the carrier for AT&T's iPhone. Among contract customers, Verizon's churn was 1.13% last quarter, compared with 1.08% a year ago. AT&T has seen its churn drop to 1.17% from 1.22% from the year-ago period.

Verizon picked the right fight as the industry's biggest selling season gets under way. More than any other carrier, it has made network reliability the cornerstone of its value proposition, and after all the bashing AT&T has taken for its strained network, Verizon appears to have successfully seized the opportunity to make network quality -- as opposed to handsets -- a competitive advantage.

Both sides are firing out ads at a rapid clip, and, according to people familiar with the carriers' plans, more are in the offing. Verizon is stamping out more humorous permutations of its 3G-coverage-map ads created by agency of record McCann Erickson (one shows the iPhone among the Island of Misfit Toys; another shows a Verizon map blocking the TV screen at a football party while the AT&T map over the same screen allows revelers to watch the action).

AT&T spots star Luke Wilson as a likable everyman refuting Verizon's claims, and in coming spots the actor will highlight the things that its competitor doesn't offer, such as rollover minutes. (BBDO is AT&T's agency of record.) One of the newer installments shows Mr. Wilson tossing out postcards all over an oversize U.S. map to communicate that AT&T has coverage in all those places. AT&T is splitting the commercials into two parts; the first installment runs in the beginning of a commercial break, and the second runs at the end. The idea is to amplify AT&T's breadth of coverage, as the map has been thickly blanketed with postcards between the two airings, to show how many Americans are covered by AT&T's service. WPP's MediaEdge:cia handles AT&T media.

Verizon/AT&T at a glance
How the numbers stack up
AT&T VERIZON
81.6 MILLION Total subscribers 89.0 MILLION
1.17% Churn (contract customers) 1.13%
$15.05 Average data revenue per user $15.59
1.39 MILLION New net retail contract customers 1.02 MILLION
$12.4 MILLION Wireless-service revenue $13.5 MILLION
$3.4 MILLION Wireless-operating income $3.5 MILLION
IPHONE Flagship phone DROID
$3.7 BILLION Annual measured media spending* $3.1 BILLION
Unless otherwise noted, data is for third quarter 2009.
Source: Company reports.

Online, AT&T has blitzed NYTimes.com, the Weather Channel and other websites, naming the hundreds of cities it serves. Both its web and TV ads echo Verizon's data-driven approach, showing it has the numbers on its side: "AT&T covers 97% of all Americans. That's over 300 million people." Meanwhile, Apple's salvo is also aimed at silencing the Droid, Verizon's new flagship smartphone, which launched to the tune of $80 million to $100 million, the biggest product rollout in its history. (McGarry Bowen handled the launch.) Already churning out near-weekly spots to attack Microsoft, Apple's two new TV spots show an iPhone user navigating data (reading e-mail and making dinner reservations) while on a phone call. With Verizon lacking devices that support simultaneous data and talk, Apple's spots ask: "Can your phone and your network do that?" Its agency is TBWA Media Arts Lab.

Still, experts rate Apple's response as mild. "It's fairly pedestrian," said Tom Nolle, president of telecom consultancy CIMI Corp. "Apple realizes they're going to need Verizon to be big in the U.S. ... Verizon has less to lose, because they understand Apple will come to them eventually."

Most branding experts say Verizon has the better strategy, and calling in the lawyers was not a good PR move by AT&T. "The genius of Verizon's strategy is the insight that consumers don't know the difference between 3G or any other coverage. All consumers know is that they aren't happy with AT&T's service," said Karl Barnhart, managing partner at CoreBrand.

Moreover, Mr. Barnhart said Verizon didn't lose any points for attacking its smaller rival; though Verizon has more subscribers, AT&T is the perceived brand leader. "This allowed Verizon to come out with its map campaign without it feeling like a bully," he said. "In this case, because AT&T has the bigger brand, it didn't feel like bashing. It felt like Verizon was just being honest."

And some said AT&T should just move on and fix what's wrong. "If AT&T had done a better job of listening and responding to what was said, they'd be more effective than any 30- second spot," said Joseph Jaffe, who heads marketing firm Crayon. "Now, they're spending all this time and money talking to Verizon when they should just shut up and focus on the people who count."

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