Telefónica Digital puts advertising at heart of growth plan

Telefónica Digital hopes new products, partnerships and expanding existing units to international markets will mean its financial services and advertising unit will generate up to €1.1bn in revenue by 2016.

The UK ad unit, O2 More, offers services such as opt-in SMS offers platform O2 More and its loyalty programme Priority Moments. It currently makes £60m (€75m) in annual revenue and is the company’s best performing territorial ad division.

Telefónica Digital is also looking to drive growth through partnerships, CEO Matthew Key said at an analysts and media event in London today (6 July)

The company recently signed agreements with Facebook, Google, Microsoft and RIM to allow its customers to pay for digital goods via their mobile phone bills rather than needing to use their credit or debit cards.

Telefónica Digital says this will help drive the paid-for content market, especially in developing territories where credit card penetration is low. The service will be available in 14 countries by the end of the year.

The company has also expanded its partnership with Visa. Both companies have entered an agreement to set up a joint innovation fund for mobile payment services such as mobile wallet, NFC, and merchant offers. Visa is already a partner of the O2 Wallet in the UK and has worked with Telefónica in Europe on a number of separate projects.

Key also reiterated Telefónica Digital’s commitment to Mozilla’s forthcoming HTML 5 mobile operating system, Firefox OS. The company hopes the OS will help drive smartphone penetration, by offering handsets that produce the “same experience as Android but cheaper or a better experience at the same price”.

Key added: “A strategy for any business to be over-reliant on one supplier is a bad thing and – especially in Latin America – too many of our smartphones are reliant on Android.”

Ultimately, Telefónica Digital hopes that by adding over the top services beyond its traditional voice and text offering, the company’s operator units will reduce churn and grow

To drive revenue from business partners, Key said the company has ambitions to “kick start” the mobile advertising market in Brazil by using its UK model as a blueprint. Telefónica Digital will launch services including push messaging, display advertising, loyalty products and location-based marketing in the region.

The advertising market in Brazil grew 11 % to €15bn in 2011, according to Group M and ZenithOptimedia – a faster growth rate than the Western European market, demonstrating why Telefónica Digital is so eager to launch advertising services in the region.

Roughly half of Telefónica Digital’s €5bn revenue target is expected to be generated from Latin America.