European telcos allowed to challenge big tech dominance of online ads

In a major ruling, the European Commission has greenlit an advertising-based joint venture between Deutsche Telekom, France’s Orange, Spain’s Telefonica, and UK-headquartered Vodafone, in a move designed to challenge the biggest companies in online advertising, namely Google and Meta.

Why it matters

While the European Union (and the US DOJ) has clamped down or investigated competition abuses against some of the big tech companies for different reasons, there has typically been less movement in opening up competition for consortia that could build similar business.

With this approval, the European Commission – the EU’s executive branch – has opened up the space for a continent-wide identification solution intended to challenge the largest ad companies in the world. It comes as digital advertising moves away from the third-party cookie, with many observers seeing the space for a solution from outside Big Tech. 

The opportunity

For the telcos, this represents a high-margin business opportunity at a time when these firms are being squeezed by higher demand for internet use and a competitive telco market that has driven prices down. It comes while there’s growing interest across the bloc in working out how traffic-heavy services like Netflix might be made to bear some of the cost of data.

While many having attempted to build content layers, a step into digital advertising represents an opportunity for a new source of growth and, vitally, net revenue.

What’s going on

Reuters confirmed earlier reports that the Commission was set to approve the joint venture, with the EC telling the news agency that the transaction would not impact competition in the markets that these companies serve.

The purpose of the project is to develop an Europe-wide identity solution that is both GDPR and ePrivacy-compliant from the outset.

In a press release from Telefonica, one of the participants, it says that the “four companies will take equal 25% stakes in a newly-formed joint venture holding company, to be based in Belgium and run by independent management under the oversight of a shareholder-appointed supervisory board”.

The resulting platform is designed around consent from consumers, to allow communications from brands via publishers. There’s the option to revoke consent either through the publisher, brand, or a central privacy portal. It follows a trial of such a system in Germany using Vodafone and Deutsche Telekom’s networks in the country.

Sourced from Reuters, WARC, Telefonica