How O2's data conservatism frustrated Weve's mobile ad potential

The decision by O2 to axe third-party ad campaigns through Weve, once the great white hope of mobile marketers, had its roots in the telecoms operator striking a balance between turning on the ad revenue taps and keeping its customers' trust.

How O2's data conservatism frustrated Weve's mobile ad potential

Excitement about what Weve could do for advertisers was strong at its launch in 2013 and also its relaunch in 2015, but in 2018 there is only talk of missed opportunities.

O2 is at pains to state it is not closing Weve completely, but it is making 26 roles redundant, meaning it will retain just seven staff from a team that at its height numbered above 100. Those left will have a brief to provide data to Weve partners but will no longer be selling media.

The ship that sailed without Weve on it was programmatic display advertising, according to industry figures, who ascribe the failure to move with the market to the reluctance or inability of Weve’s backers to share their troves of first-party data with agencies.

One source formerly close to Weve is sad but not surprised about the upshot of its failure to evolve far beyond its initial offering of SMS and MMS campaigns to O2, Vodafone and EE – and later, just O2 – customers.

"There’s great talent working there, but the world will survive without someone selling targeted text messages to O2 customers," they add.

"SMS wasn’t very sexy," is a pithier opinion, from Fetch media operations director Luke Dansie, who adds: "Display was supposed to be the silver bullet but Weve had a very expensive product that didn’t justify its value to us."

The silver bullet was fired in September 2015, when managing director Nigel Clarkson and sales director Tom Pearman (who have both since moved on) announced that segmented data from Weve would be made available to agency trading desks.

By then Weve was in the sole ownership of O2, which had bought out its joint venture partners earlier that year – a sign that being in the ad business was not a priority for many telecoms operators.

However, it soon became apparent that the terms on which buyers were being offered O2’s data didn’t go far enough for them to stay interested for long, recalls Nicolas Bidon, now the global chief executive of WPP’s programmatic trading arm Xaxis (but at that time O2's UK managing director).

"We did do a couple of test campaigns for clients with Weve programmatically, but there were issues with integration. We have our own data management platform and to scale our buying we wanted to integrate our data with theirs, but things never quite materialised.

"Part of the problem was technical resources to build the integration, but I never knew whether the block was just technical or also political on Weve’s side. I think there was a lot of soul-searching on behalf of the backers."

In response to that, O2’s spokesman says: "O2’s approach wasn’t always how buyers wanted to trade; this was due to legal and privacy constraints relating to our customers’ data."

Weve did strike an agreement with AOL (now Oath) last year, through ad exchange Axonix (then owned by O2 and private equity investor Blackstone), allowing AOL clients to target customers using O2 user data segments. It also sells a service designed to verify location data for device IDs, in partnership with another O2 subsidiary, Statiq.

Earlier this month Blackstone took 100% ownership of Axonix, with O2's parent company Telefonica in return taking 100% ownership of Statiq from Axonix, a spokesman for Telefonica confirmed. Axonix no longer has access to O2's data and Statiq has taken the Axonix agreement with Oath.

Weve’s 2016 financial results provide an early sign that man could not live on texts alone. Revenues dwindled from £12.1m the year before to £9.6m and the number of campaigns it ran fell from 804 to 680.

The O2 spokesman argues the comparison is unfair because only the earlier year included the contribution of Vodafone and EE, and claims it actually grew its own revenues and made Weve profitable. However, the spokesman declined to release details of Weve’s 2017 financial performance, which are not due to be published until next month.

Weve revenues were small beer compared to the £1.17bn size and 69% growth in 2017 of the UK smartphone video advertising market (according to IAB/PwC data). The source formerly close to Weve says the sales team wanted to move into this market. "But they needed data for that," the source adds. "They were sitting on a goldmine of data but could never get permission from telcos to plug it into ad exchanges."

O2 senior management worries about a potential backlash from mobile customers are understood to have manifested themselves in (polite) calls to the Weve team on occasions when a customer enquired why they had been targeted with particular ads after conducting a search for a product.

For its part, O2 retorts that this claim is "not correct" and also protests that its decision to axe third-party ad sales was not influenced by privacy concerns. That’s at odds with the tenor of industry opinion and the closeness of the move’s timing to the recent rollout of GDPR.

"I’m sure many factors would have impacted their decision but I’d assume one will likely have been recent trends around privacy and heightened consumer sensitivity on the topic," according to Alex Tait, founder of media, content and digital consultancy Entropy and former Unilever media and marketing services director, echoing Fetch’s Dansie.

"O2 doesn’t want to alienate customers, who are its main revenue stream," says the source formerly close to Weve, pointing out that the same challenge probably exists for other adtech companies owned by telcos. This doesn’t include UK operators, but AT&T recently bought AppNexus and Verizon acquired AOL and Yahoo to create Oath.

Dansie suggests that O2 could have solved its problem by copying Verizon and buying an online media property that could then activate O2’s first-party data in its own ad sales.

"Clients are getting pickier about where their ads are shown rather than chasing audience," he adds. "They say they’re happy to employ data in ads, as long as they’re on the platform owned by the data handler."

Bidon concludes that Weve’s failure to realise its potential is a loss to UK advertisers, who are missing out on mobile first-party data that is more readily available to brands in other regions.

"Weve missed the opportunity to develop a credibile mobile alternative to Google and Facebook. Since 2015, alternatives such as GroundTruth have appeared, but the jury is still out as to whether those kind of outfits will do well in Europe in a post-GDPR world," he says.

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