Today at DMS, an executive interview with Ken Ray, VP and CMO of AT&T Advertising Solutions, revealed some of the inner workings of the media giant and its technology roadmap.

“When people ask me to explain AT&T, my answer is what we are doing this week,” he told BIA/Kelsey President Neal Polachek on stage. The dynamic part of the organization is housed in its AT&T Interactive (ATTi) unit, which develops mobile and online sites, apps and advertising products like YP.com.

“That’s the factory, the digital factory,” he said, “We’ve hired several hundred engineers, and that’ s our bet and our investment on the future.”

Much like the packaged goods world where Ray comes from (P&G), this involves a value chain of product development, marketing and distribution — the model on which ATTi’s products have been generally devised.

“What we wanted to do was make sure we integrate the organization,” said Ray about the challenging size of AT&T. “Product development teams work on mobile Web sites or mobile preferred listings. Then it goes to marketing where it’s priced and promoted then pushed out into the field.”

Marketing the products is a vital part that Ray oversees, though rarely discussed for a company that itself provides advertising services for other companies. This comes on the heels of the major TV and cross-media marketing campaign (launched at this conference) for YP.com and YP mobile.

“Traditional agencies are still TV junkies. They talk a big game about interactive [media], but TV is still their bread and butter and it’s still best reach mechanism,” he said. “I buy millions of dollars of media, but no one provides ROI like the [publishers] in this room.”

Ray ended with the common pain point for traditional media: sacrificing margin in the move to digital. It’s a difficult switch, he asserted, but one that requires a tolerance for margin losses with a long view toward investment in the future. This, of course, isn’t easy for public companies.

“We’re trying to balance margins; we’re trying to balance product and trying to appropriately allocate spend,” he said.