Amid the management upheaval and the slowdown in its traditional network infrastructure business, Ericsson has been quietly working on how it can play a role in the digital advertising space.
The fruits of two years' labour were unveiled last week with the launch of Ericsson Emodo – a business that aims to place the Sweden-based vendor between the mobile operators, advertisers and publishers who now all dance to Facebook’s and Google’s tune.
The Silicon Valley giants have cornered the market in digital audiences, or the data sets that advertisers now demand in order to sell their wares.
Traditional publishers, less aware of exactly who their readers are, have been the most affected by this change, but advertisers who have followed the technological disruption are starting to question a system where Facebook and Google are the puppetmasters in chief.
Mobile operators, meanwhile, have an opportunity to make their mark on the industry if they work together to deliver data sets that are, according to Emodo General Manager Paul Cheng, “the biggest and best”.
Cheng, whose CV includes a stint at US Federal Reserve in the 1980s, believes success will only be achieved when four key criteria come together: high-quality data, audience scale, audience addressability, and a positive user experience.
It all starts with the data, which is where mobile operators come in.
Google and Facebook have achieved their success by luring advertisers with specific demographic data sets – eg, 18-24 year-old males in London – with behavioural data about what they are looking at online.
Providing such granular detail has been beyond traditional publishers, leading the two US companies to gain 74 percent of global digital advertising revenues, according to Forrester data from Q2 this year.
But Cheng says Emodo can help mobile operators to insert themselves into this world.
“The biggest and best data sets reside in the mobile operator ecosystem,” he says.
“It is probably better [data] than what Facebook and Google have.”
It is a bold claim and one that eMarketer analyst Karin von Abrams says depends on what you’re looking for.
“Operators will of course have much better data about location habits, for example, and may know more about app usage outside Google and Facebook,” she notes.
But there are several barriers for telcos to overcome.
Cheng chooses to focus on scale: “Advertisers want web-scale so you need to build a collective of data sets,” he says.
Ericsson, as a neutral party, can play a role here, he adds, but needs operators to do that thing which does not come naturally – work together.
Indeed, the likes of Altice, Telenor and Telefónica are all working on their own advertising initiatives that they have set up in recent times.
“Operators have tried on their own...but the bigger opportunity lies in trying to aggregate the data across the globe,” warns Cheng.
Clearly, he senses it will be a struggle.
Speaking about his time working in start-ups he says: “Operators are fairly slow and it’s very difficult to work with them sometimes.”
Since arriving at Ericsson in April, Cheng has built a 25-strong Emodo team that works with operators to source, process and ensure data sets are privacy compliant across multiple jurisdictions.
Emodo is launching with anonymised data of about 1.3 billion users in the US, Canada, the UK and Japan from an unspecified number of Ericsson’s operator customers.
Although Cheng says it is still early stages, this is still well short of the more than two billion users Facebook has amassed on its own.
Von Abrams takes issue with Cheng’s claim that the data is anonymised, saying it is “a very contentious area”.
“I think very few players in the ad industry have really cracked the problem of balancing relevance with privacy,” she explains.
Referencing the promotional video that Ericsson published to coincide with the launch of Emodo, von Abrams adds: “Mobile users may get more relevant ads but it could be seen as a bit spooky, and not very ‘anonymous’ for the end user.”
No matter, Ericsson plans to partner with operators by effectively licensing their data and sharing the revenue.
And Cheng’s message is clear: if they work together they can make “a lot” of money.
On one side of the value chain, Ericsson is working with publishers such as VICE to help them improve things such as ad targeting.
The company’s SVP of Advertising Product and Solutions, Andrew Smith, said at last week's launch: “We’re excited to work with Ericsson Emodo to help us better understand our audiences so that we can serve them better and provide a more relevant and useful advertising experience.
“The scale and quality of the data that Ericsson Emodo brings empowers publishers to compete for their share of advertising budgets.”
At the other side of the value chain, Cheng claims advertisers are seeing “monopolistic tendencies” from Facebook and Google, including price discrimination and self regulation.
Emodo wants to position itself as a credible alternative, but eMarketer’s von Abrams says it is too early to tell whether that will come to pass.
“In principle it looks promising but surely one would want to look at quantified results of campaigns to make a judgement,” she says.
Nevertheless, there are chinks in the armour of the market leaders that give hope to the likes of Ericsson, according to the analyst.
“Google and Facebook are vulnerable in terms of brand safety and can be rather blunt instruments,” she explains.
“They have also been discredited to a considerable extent because evidence would suggest that their profits are the most important measure for them, so their reputations haven’t done well in the era of Russian digital meddling, fake news, and so on.”
Somewhat ironically, profits are exactly what Ericsson CEO Börje Ekholm is looking for as he attempts to turn around Ericsson’s troubled ship.
Emodo is unlikely to drive the vendor’s fortunes in the short term, and Ekholm’s priorities will surely be focused elsewhere.
While the attempt to drive scale is laudable, the recent history of telecoms would suggest Emodo will be too little, too late.