The near-$40 billion acquisition of T-Mobile by AT&T has set the business world ablaze with responses ranging from excitement to fear of duopoly.
The effects of a merger this size will impact how and how much Americans spend on their mobile and web services – but the deal also impacts Madison Avenue.
While some agencies will lose a hefty advertising business from T-Mobile, overall, the U.S. mobile advertising industry will benefit from this marriage of convenience and conquest.
1. Expanded Engaged Reach
The more users a brand can reach and get to engage with a campaign, the better. The combination of AT&T and T-Mobile means brands will have the opportunity to reach tens of millions more potential customers.
This expanded engaged reach will be driven by two factors. First, AT&T will instantly expand its smartphone user base by 8.2 million T-Mobile smartphone users. Second, current T-Mobile customers will presumably have the option to choose the iPhone, which could speed up smartphone adoption by the remaining 26 million T-Mobile feature phone users.
2. Reduced Fragmentation
One challenge brands face in advertising on mobile devices is dealing with the fragmentation of multiple operating systems and handsets. As the no.2 and no.4 carriers combine forces, a likely outcome will be a reduction in device and OS fragmentation. The combined carrier is likely to reduce the number of device options available to customers, and wield greater control over device winners and losers. All else equal, the best devices and operating systems will rise to the top – expanding the market share of the winners. This will make it easier for advertisers to reach a wide audience with a single mobile creative.
Reduced fragmentation will have the added benefit of driving higher quality content. How? With more users choosing the best mobile operating systems, such as iOS and Android, developers and publishers will have access to more customers and create more monetizable advertising inventory. As a result, they’ll generate higher ad revenue, which will motivate them to spend more to create higher quality content.
3. Increased opportunities to reach the right user at the right time
The potential merger promises to deliver consumers better access to a faster and more powerful wireless network. As a combined entity, redundancies can be eliminated and more capital can be invested on faster data pipes spread across more users. As has been proven time and again, faster pipes means more data consumption – more video, more web surfing and more app usage.
Since this contentis largely ad-supported, available inventory will grow, allowing brands to reach a wider audience, target more effectively and achieve better results, boosting the overall mobile advertising spend faster than analysts previously estimated.
Overall, there are many arguments about whether or not this merger is a good thing for consumers. Each argument has its merits. From the perspective of the booming mobile ad business, however, this merger represents a win for brands.