First things first. While AT&T is reportedly closing in on a $1.6 billion deal to acquire the ad tech firm AppNexus, according to the Wall Street Journal, Brian Lesser – who runs AT&T’s advertising division AdWorks – politely declined to comment.
Still, there’s plenty for Lesser to talk about now that the union of AT&T and Time Warner is complete. Lesser left his role as North American CEO at the ad buying giant GroupM in 2017 to help build out AT&T’s budding but still under the radar ad business.
And now with Time Warner in the fold, Lesser has massive ambitions for television advertising. He wants to reinvent how it’s delivered (using data and tech) and ultimately he wants AT&T to build the ad tech infrastructure that could serve all the major TV networks and cable distributors (not unlike what Google has done with digital ads).
Business Insider caught up with Lesser at Cannes to talk about the future of TV advertising. Here are some of his comments:
AT&T quietly has close to a $2 billion TV ad business through DirecTV
“I think a lot of people don’t understand that we run a significant advertising business today. AdWorks is close to a $2 billion business, and its growing significantly – high teens growth. And that is the biggest addressable television business in the country.”
Wait, what’s addressable TV?
Cable and satellite TV providers typically have two minutes per hour of commercial time that they get to sell. And these companies can beam different ads to different neighborhoods or households (like people who have kids and might want a minivan) using cable boxes or satellite dishes. This is not to be confused with “connected TV,” which encompasses ads in TV apps like Hulu or Crackle.
eMarketer says that addressable TV ad spending should surpass $3 billion next year.
For starters, AT&T wants to turn on more addressable ads in Turner networks
DirecTV can deliver addressable ads to over 15 million homes. It wants to do as much of this as it can on Time Warner’s cable networks e.g. TNT, TBS, TruTV, etc.
“Here’s my thesis. Advertisers need a more effective way to reach people with ads in TV and video. TV is still very very popular. Advertisers just want it to work harder for them. They want it to behave more like the digital ads they like … and they want the quality it offers. But for the most part, they are disappointed with the options they have in the market.”
“You can do interesting things in TV, but not across multiple sources of inventory.”
But, here’s the challenge. AT&T can’t simply turn on addressable ads across all of its newly owned cable networks. That’s because those networks are distributed by other cable and satellite companies besides DirecTV – like Spectrum in New York or Cox in the Midwest – and AT&T doesn’t control the ads flowing through those systems.
At least not yet. Lesser said he wants to make deals with other cable companies to either deliver ads through their pipes, or as an alternative it could license its ad tech to those companies.
“We now have the potential for much more addressable TV… If we build a platform that allows us to aggregate inventory on the supply side, and make it easy for advertisers to access on the demand side, we hope to partner with other [distributors].”
AT&T wants all the big TV networks – not just Time Warner channels – to eventually plug into its ad platform
“Ultimately we are stronger if we can create one connected marketplace for addressable television rather than asking advertisers to buy it from multiple companies.”
Could other non Time Warner networks (like Viacom or NBCUniversal) be part of this connected marketplace? “Over time, our ambition is to partner with other media companies that might want to be part of this connected marketplace.”
Lesser isn’t worried about declining TV ratings and the push toward streaming
What about this idea that the generation being raised on Netflix and streaming is never going to need or tolerate interruptive ads?
“That’s wrong. It’s just wrong. The economics don’t work. You can’t pay for all of the content that is being developed through subscription services. That doesn’t mean that advertising as we know it is the solution. But content that is subsidized by brands is not going to go away.”
AT&T wants to make it clear that it’s very serious about advertising, and plans to do more with digital ads
Lesser pointed to the way AT&T has organized the company into three buckets: one focused on communications (like the wireless network), Warner Media, and the ad division.
“I think AT&T is different [than some of the other media and telecom giants] as evidenced by the fact that is has a standalone ad unit that reports up to our chairman and CEO.”
Again, Lesser couldn’t discuss any potential acquisitions. But he said that AT&T’s data (like where its wireless consumers live and how old they are), could be used to target people with ads all over the web – in a privacy compliant fashion.
“We will be as good as anyone in using data to indentify an audience.”
Lesser actually spent a bunch of the past few months helping AT&T justify its case for the deal before the DOJ
“I was very involved in the litigation. That’s not something I had planned for obviously. When I joined the company on October 1 we didn’t know we were going to get sued by the Justice Department. Once we did, I became part of the core litigation team to help make our case … on why advertising is a big part of the value we are going to bring consumers.”
Wait, you’re really going to make ads better for consumers?
“I believe there’s a paradox we now live in,” he said. “There’s never been as much great content as there is now. It’s never been delivered over more channels and devices. Advertising is as good as its ever been in terms of how targeted it is. And the world has never needed advertising more because all of this content can’t be paid for by subscription services.
“And so more content means we need advertising to pay for it. And yet people for the most part still hate advertising. If we’re successful in delivering advertising that’s more relevant to consumers and engaging, then there’s no need for less content.”
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