Yahoo was at the center of a bidding war between Verizon, AT&T and others this summer. On July 25, Verizon announced its victory to the tune of more than $4.8 billion, and is now the owner of most of Yahoo’s assets.
Verizon is already a huge company with millions of customers. However, its growth has slowed, and the company recently reported a decline in quarterly revenue. David Gelles of the New York Times highlights price wars with other telecom giants as one of the reasons for this.
The very idea of telecommunications doesn’t have quite the luster it once did. With the advent of smartphones, and their high rate of use among Millennials, companies like Verizon, AT&T and Sprint are merely catalysts for people to engage in mobile search and social through the likes of Google and Facebook.
McKinsey & Company calls telecommunications companies an “untapped promise of big data.” Sure, they have a wealth of information, but few are managing to use it to turn a profit.
A reading of Verizon’s announcement of the acquisition makes it clear that the company has every intention of moving into the digital media space, perhaps taking some ad revenue from Google, Facebook and others. Verizon wants to be an outlet for advertisers, across multiple screens and to reach hundreds of millions of users.
What the Yahoo Acquisition Means for Advertising
This time around, she’s speculating how Yahoo could help Verizon turn its data into dollars.
Kaye points out that companies like AOL and Yahoo are content rich. Integrating that with the location data that mobile service providers have means Verizon may have a great new source of targeted ad revenue.
Mobile operators are exploring new subsidized services that target offers and ads from sponsors in exchange for underwriting user costs. For Verizon, AT&T and other mobile operators, having digital and mobile ad platforms and email marketing capabilities like Yahoo’s would come in handy for targeting offers or actual ads customers could view in exchange for more streaming data.
She goes on to say that the Yahoo buy is a content play that provides “lots of content for targeted advertising, especially in video, which drives premium ad prices and higher data use.”
Gelles (see earlier link to New York Times piece) talks about how, as a part of this plan, Verizon is going to change whom it views as the customer. While it used to be a parent signing the entire family up for a cell phone plan, it will now be the advertising companies that want to reach that same family, and want to use Verizon’s data to do it.
Verizon makes no secret of this. Executive vice president (and the one tasked with the successful merging of Verizon and Yahoo) Marni Walden told Fast Company that building the audience organically would take too long in the competition with brands like Facebook:
“We knew when we bought AOL that that wasn’t the end of the story, there was more that we would want to do,” Walden says. “We’re building something that we want to turn into a very large business. Getting audience and getting scale is critical.”
Of course, Verizon will have to be careful about using customer data to boost revenue. And it will have to stay realistic about catching up with brands like Google, which had more than $67 billion in ad revenue in 2015.
Now that both AOL and Yahoo will be under Verizon’s control, many of us will be waiting to see how this will play out.
As Gelles put it:
For years, AOL and Yahoo orbited each other like two dying stars. Rumors that one would buy the other were constant. But egos, activist investors and fluctuating share prices prevented the companies from going through with the union.
In the meantime, Yahoo will continue as an independent company until the deal is finalized, which is expected by early 2017. Yahoo will change its name, and CEO Marissa Mayer may or may not have a continued presence with the brand.
Regardless, it could mean big changes in the way that telecom uses its data to its advantage for advertising.