Why AT&T's Copying Every Hot Local Ad Trend
AT&T is just the latest big player to launch a Groupon competitor, joining Facebook, Google and a gaggle of newspapers and magazines in the trend. The daily-deals service comes weeks after AT&T announced its new location-based service ShopAlerts, following the lead of mobile startups ShopKick, Loopt and Where.
So why exactly has the No. 2 U.S. telco taken to launching ad products that copycat the hottest and latest in local advertising? To slow the 16.7% decline last year in its very sizable yellow-page ad business. As the nation's largest yellow-pages publisher, AT&T needs some serious reinvention to hold on to its remaining $4 billion in revenue from yellow-pages print and digital advertising.
It's no surprise that the yellow pages are getting assaulted on all sides by web directories, search and, now, group deals that target local business' limited ad budgets. Publicis Groupe 's ZenithOptimedia estimates advertising in U.S. directories in 2011 will total $10.9 billion, down 4.4% from last year. That's down nearly one-quarter from the industry peak of $14.5 billion in 2006. AT&T is the only yellow-pages publisher among the nation's five largest to not undergo bankruptcy or debt refinancing in recent years.
With its new product, AT&T is following the thousands of local businesses that have converted yellow-page budgets to cover losses with cut-rate Groupon and LivingSocial deals. AT&T this week began to register users for its deal-of -the-day program on its site YP.com in Los Angeles, Atlanta and Dallas/Fort Worth. For registering, those users get $10 toward their first deals purchase.
"Entrance into the daily-deals marketplace is a natural opportunity to expand a nearly $1 billion local advertising business and offer another way for merchants to connect with consumers," an AT&T spokeswoman said in an email. AT&T Interactive already offers coupons on YP.com and in YP mobile apps.
In March, AT&T launched an opt-in mobile service in partnership with startup Placecast to send text-message coupons to mobile subscribers when they're in proximity of certain retail locations. So far, Hewlett-Packard, JetBlue and others have signed on. (The service is also a play to add value for AT&T mobile subscribers, in an aim to ward off defection to competitors Verizon, Sprint and T-Mobile.)
While Groupon and LivingSocial built the deals market that is projected to hit $3.9 billion in revenue by 2015, according to BAI/Kelsey Group, AT&T has seen ad revenue fall off in recent years. Stated revenue in AT&T's Advertising Solutions segment, which includes yellow- and white-page directories, internet-based advertising and local search, has tumbled 16.7% to $3.9 billion in 2010, compared to $4.7 billion in 2009 and $5.4 billion in 2008.
"The decrease in 2010 was largely driven by continuing declines in print revenue ... as customers reduced or eliminated print ad purchases due to the slow economy, partially offset by increased interactive revenue ... as customers purchased more electronic advertising," according to AT&T year-end filings.
AT&T has seen growth in internet ad revenue, but that growth has slowed in recent years and has not been substantial enough to plug losses in print. Last year, while print-directory revenue fell $858 million, interactive increased $77 million. Compare that to 2009 and 2008 increases in interactive ad revenue of $132 million and $196 million, respectively.
One bright spot for the carrier's new deals product is that , while almighty Groupon has 60 million subscribers slobally, AT&T has 95.5 million wireless subscribers in the U.S. alone. AT&T also had the third-largest ad coffers in the U.S. last year with more than $2 billion in media spending, according to Kantar Media. With that marketing might, AT&T could blanket any future Groupon Super Bowl effort or other competitors' attempt to get the word out.