Singtel's wholly owned subsidiary Amobee notched up much better revenues of $113 million last year, more than double the $54 million of a year earlier. But the digital advertising unit is still not profitable.
Before the red ink has dried, however, SingTel has acquired another two advertising tech companies, Adconion and Kontera, to integrate with Amobee and boost the telco's digital business.
SingTel has given Amobee three to five years to turn profitable but is the telco making a risky bet buying these two firms?
Let's take a step back.
Sales of mobile devices - smartphones and tablets - are going through the roof while desktop PCs and the traditional laptops are on the decline.
Research firm Gartner said about 1.9 billion mobile phones will be sold this year, compared to 278 million PCs.
People are spending a lot of time with their mobile devices. And that means huge opportunities for advertisers and brands to reach these consumers through what they hold in their hands.
SingTel wants to get into this business from the ground floor. But of course it is not alone.
Giants such as Google and Facebook have also stressed mobile advertising for their growth.
In this race for a fast-emerging advertising market, SingTel was understandably keen to proceed with its 2012 purchase of Amobee for US$321 million. This acquisition gave it a mobile-centric advertising network.
But it was not enough.
On the Internet, scale matters. Advertisers and brands demand breadth and depth.
Breadth is reach: getting hold of consumers through the different devices in their hands as well as through the various applications they are using on them such as e-mail and social and video networks.
This is the easy part. The more difficult aspect is gaining intimacy with the customer, or depth.
Advertisers demand precise data as this new digital age provides powerful tools to obtain it. They know their customer segment but they want to know where they are going, what they are buying at what time, what colours they like and where they like to shop.
They need to know in great detail so that they can deliver the relevant ads at the right time when they want to do a purchase. This gives them a higher return on their advertising dollar.
So why Adconion and Kontera?
Adconion provides the multi platform, whether video, e-mail or social networks, needed by advertisers and brands to reach consumers.
It has also partnered with more than 1,000 advertisers with a total media spend of US$1 billion (S$1.25 billion).
Adconion will bring these relationships and reach to Amobee.
Kontera provides the critical technology, the data analytics and the sentiment analysis to enable advertisers to know intimately the behaviour of their customers so that they know when to push the right ads.
This creates the magical mobile moment, when for example the consumer who is passing by a restaurant gets an ad giving him an incentive to dine there with a 20 per cent discount coupon.
As advertisers increasingly seek to get into the face of consumers in a personalised way, that sort of mobile moment is exactly what they want.
This kind of scale and technology offered by these two firms would take SingTel far too long to build - hence the acquisitions.
A challenge that SingTel has to grapple with is data privacy. Will consumers mind receiving ads on their phones promoting different products and services?
The telco is working on an internal guideline now.
Like all acquisitions, the test is in good integration with the acquirer and then executing the strategy to go after the digital advertising market which is expected to hit US$100 billion by 2017.
SingTel is getting into a new global battlefield of digital advertising which is beginning to get crowded.
Its bet has been placed. The game has some way to play out before investors will be able to assess if it was a well-judged wager.
This article was first published on June 12, 2014.
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