'Either it happens or TV gets decimated': Insiders are split on AT&T's chances of building an ad platform for the entire TV industry

• AT&T says it wants to build a technology platform the entire TV advertising industry will use. It sees it as a natural move to counter the rise of Google and Facebook.
• But TV executives are torn over whether rival media giants will ever be able to collaborate on such an effort.
• Some see the timing as perfect, given TV's fast-eroding ad dominance and the ad industry's embrace of data and automated ad buying.
• Yet others see inherent conflicts leading individual companies to stay in their corners.

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Can the TV advertising industry work together to fight off the duopoly?

AT&T's new ad boss, Brian Lesser, thinks so, but TV insiders are torn.

As Business Insider reported a few weeks ago, AT&T has some bold plans for the TV ad industry. The telecom giant, following its recent acquisitions of Time Warner and AppNexus, wants to build a TV ad hub that is used by the entire industry.

That includes competing cable and satellite companies as well as TV networks that aren't part of the Turner family.

The vision is to make TV advertising more like a "platform," à la Google and Facebook, through which advertisers can buy ads across multiple networks using automated software.

Some experts think it's the perfect time for TV networks to put aside competition and work together, or risk getting buried by digital media. Others see no chance of TV's blood rivals joining hands anytime soon.

It's that tension — and whether it can be resolved — that will make or break the success of AT&T's ambitious initiative.

It's not clear what exactly AT&T is planning

• Does AT&T, armed with AppNexus, simply want to build a TV ad platform that it licenses to loads of TV companies?
• Or does it want to build something of a TV ad exchange, where buyers use data and tech to purchase ad space across multiple TV networks all in one shot?

The first option would be tricky but not impossible, insiders say. But option No. 2 is where things get dicey.

Why it will be hard to get the TV industry to work together

For one thing, it's hard to get any competitors in an industry to work together. And TV has some unique factors at play.

For one, TV has had a terrific business for a long time. It's still a $70 billion market, despite digital media's ascendancy. Most TV ads are sold up front through person-to-person negotiations, an old-school sales dynamic that has made everybody money for a long time, even if there's not a whole lot of transparency into what different advertisers pay for ad space.

Thus, when some TV ad-sales execs hear terms like "programmatic" and "open exchanges," they think "losing control" and "plummeting prices."

"An industry platform unifier? Good luck! Fat chance!" said Tim Hanlon, the founder and CEO at The Vertere Group, which consults media companies. Hanlon said other media giants like Comcast would never work with AT&T.

But not everyone feels that way. Marcien Jenckes, the senior vice president and general manager of next-generation IT systems at Comcast, did not dismiss the idea. Like others, he's unsure about the scope of AT&T's plans. Yet he sees an urgency for the TV ad business.

"The idea that the industry coalesces on standards and technology, that for certain is a necessity," he said. "Either it happens or TV gets decimated."

Why? Jenckes says the TV business as a whole has been way too slow in investing in data and technology because it didn't have to for so long.

And now, he contends that media giants will end up building their own proprietary digital ad systems and tools that don't work together.

Amanda Kigel, a senior vice president for partner innovation at the ad-buying firm Magna, would seem to concur. "The challenge in this space is that everything is so fragmented," she said at a recent Roku event.

In fact, Roku's recent aggressive push into TV advertising is yet another example of how complicated TV's advertising future is becoming.

'Something needs to happen'

"Even the biggest TV players only see a portion of the market," Jenckes said. "Something needs to happen in order to unify those TV players. So a marketer can buy across them in an easier way than they have in the past."

Could he see a universal TV ad exchange? "I think there is some promise for it," he said. "The idea has merit." One problem: AT&T owns Turner, which presumably would sell inventory on such an exchange. Would non-Turner networks be OK with that?

"The issue they have to overcome is this bias issue," he said. "Can a marketplace be operated in a way that is neutral?"

What TV executives are saying publicly

Some of the biggest TV ad executives have shared very different thoughts on the potential for a TV ad exchange.

NBCUniversal's sales chief, Linda Yaccarino, was asked about the concept of a universal TV ad platform a few months ago at the Collision tech conference in New Orleans.

"I think it's really smart," she said. "The only thing that has stopped TV to date is technology limitations ... It's not as simple as a tech platform that you just plug into like Facebook and Google."

Yaccarino said three to five years from now we may see "accelerated steps to that vision."

Contrast that with recent comments from David Lawenda, an executive vice president of digital sales and sales strategy for CBS, at the VideoNuze Ad Summit.

"I don't see that happening," he said. "We're still in a relationship business. We sell sponsorships, we focus on having an advertisement be contextually relevant. You lose some of that ability when you start to automate."

TV has a lot to lose

Not only are TV ratings falling and Google and Facebook eating the vast majority of new ad dollars, but platforms not supported by ads are becoming the dominant vehicles of TV viewing for young people, spurring all sorts of proposed media mergers.

Advertisers are questioning TV's value like never before. So TV needs to change fast, argues Lorne Brown, the CEO of the TV ad-software firm Sintec Media.

"It's the play they have to make, no question," he said. TV needs to be able to digitally deliver unique ads targeting viewers the way Google and Facebook do if it wants to hold on to ad revenue, he argued.

In fact, he said, "If you're a midsized network, you may just want to outsource all of your sales to this kind of platform."

He believes AT&T has a compelling pitch. "Who do you want partner with, me or Google?" he said. "Neither are great, but at least AT&T can say, we do business together."

The history of TV consortiums isn't promising

Those with long memories in the ad business will point to Canoe Ventures as a cautionary tale. Back in 2008, the six largest US cable distributors, including Comcast, Time Warner Cable, Cox Communications, and Charter Communications, joined forces to help accelerate the growth of targeted and interactive TV ads, using cable set-top boxes.

It was plagued by challenges, including lots of competing agendas. By 2012, Canoe's ambitions were seriously curtailed, as it laid off workers and shifted its focus toward providing video-on-demand ad technology.

The ad-industry veteran David Verklin, now a senior adviser at The Boston Consulting Group, was at one point Canoe's CEO. "The vision for this has been there for a long time," he said. "What was so hard for Canoe is that we were just so early."

Indeed, Canoe's formation mostly predates smartphones and OTT. And TV was under far less economic pressure than it is today. "We didn't have the inventory," he said. "The ad buyers were ready. The ad sellers were just terrified about losing control."

He sees the market conditions as being much more receptive this time around. "AT&T-Time Warner allows all this to happen," he said. "It has all the pieces." The question in his mind is whether companies like Disney and Comcast will want to get on board or go their own way.

The tech challenge is very real

That's a big question. As big media companies make larger tech investments, will they be more resistant to outsource any of their ad operations? For example, if and when Disney completes its acquisition of Fox, might it want to build its own advanced ads product via the company's billion-dollar Bamtech platform?

Or could the company even expand upon Hulu's ad system once it takes control of that platform?

Either way, such factors make it harder for AT&T to unify everyone.

Jacqueline Corbelli, co-Founder and CEO of the interactive TV ad firm BrightLine, put it this way: "Lesser is trying to create one connected marketplace. It's brilliant, correct and exciting for the marketplace, but there are so many very big things that have to happen very fast in order to succeed, and the headwinds are fierce."

"There will never be one ring to rule them all," said Chris Pizzurro, the head of sales and marketing at Canoe. "But there will be a few different rings that will play nice together."

Pizzurro's theory, shared by others, is that as TV advertising becomes more digital, there may end up being several large ad exchanges operated by some of the larger players like AT&T, Comcast, and Google.

OK, but maybe this time is different

Opinions vary, but privately some ad-sales leaders are more willing than in the past to push into a programmatic ad future, even one that involves some uncomfortable cooperation.

"It would not be a bad thing if the TV market, and the advertising ecosystem in general, was more efficient," one insider said.

George Blue is a veteran TV and digital ad seller who recently logged a long stint at Fox. He's bullish on the AT&T plan, given its timing in an uncertain market. "The key is to be the solution for ad buyers," he said. "If the ad buyers and client side say yes, well Viacom, CBS, and others may have to go along to get along."

Don't forget OpenAP!

Several industry executives point to the fact that rival media firms are already getting along when it comes to OpenAP. That initiative was kicked off in 2017 by Turner, Fox, and Viacom to make it easier for advertisers to define specific ad targets in a unified fashion across networks.

NBCU signed on to OpenAP earlier this year. Each partner has committed to spending millions on the project over the next five years.

While OpenAP has primarily been focused on making data and analytics simpler, phase two of the project is to build a transactional platform where people will be able to buy and sell ad space, people familiar with the matter say.

It's not clear whether OpenAP's planned ad platform meshes or conflicts with what Lesser's AT&T ad team is planning. AT&T hasn't said much about OpenAP, though according to sources there are no plans to alter the OpenAP rollout for the foreseeable future.

'I'm optimistic'

Regardless of whether OpenAP, AT&T or another solution emerges as the foundation on which TV's advertising future is built, the industry is clearly in line for a ton of change in the near future.

The fact that such TV titans are talking to one another speaks to how their position has changed in a world dominated by Google and Facebook.

"My hope," Comcast's Jenckes said, "is that the industry comes together fast enough to save itself."

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