The growth of the mobile telecommunication industry is slowing, and as a result telecom giant Verizon is seeking to redefine itself.
The mobile telecommunication giant’s buyout of the company follows the purchase of AOL in 2015 for $4.4 billion, and will create a new rival in mobile media technology.
Advertising technology is the key factor in Verizon’s takeover of Yahoo and AOL.
“Just over a year ago we acquired AOL to enhance our strategy of providing a cross-screen connection for consumers, creators and advertisers,” said Lowell McAdam, Verizon chairman and CEO. “The acquisition of Yahoo will put Verizon in a highly competitive position as a top global mobile media company, and help accelerate our revenue stream in digital advertising.”
The integration of Yahoo and AOL will provide Verizon with a digital media platform that will allow them to break away from the slumping traditional telecom business, and become part of the growing digital marketing sector.
By acquiring Yahoo (and AOL, and many other advertising-related businesses) Verizon has purchased the necessary advertising technology – mobile ad-serving, targeting services, and a huge amount of content – to break into the digital marketing sector.
This ad technology is essential, according to analyst Craig Moffett of MoffettNathanson, who told the Wall Street Journal, for Verizon to create “the digital advertising platform they need to execute their video reinvention strategy”.
The accumulation of these companies, their audiences and their technologies will lead to huge advertising revenue from content provided by Verizon. Yahoo currently has more than one billion monthly users, including 600 million monthly mobile users.
Verizon’s takeover means they will have access to the online behavioural data of those customers, and will be placed to advertise on some of the web’s most trafficked websites – Yahoo News and Yahoo Sports.
Their goal is to reach 2 billion people by 2020.
The addition of Yahoo and AOL will create one of the largest portfolios of owned and partnered global brands with extensive distribution capabilities, according to Verizon.
Verizon’s move, however, is problematic. An article by Fortune goes into detail about this problem, but basically Facebook and Google have succeeded in profiting of digital content without producing it.
But Verizon is looking to produce it’s own content by buying up assets like Yahoo. There is “no guarantee people will watch it or advertisers will want to be associated with it”.
Verizon’s desire is hugely ambitious. It wants to retain its empire by becoming the major global force of digital advertising, but it is very much the new kid on the block (which seems a ridiculous statement given the company’s valuation of $206 billion).
For now, at least, Facebook – through social media – and Google – through search capabilities – dominate the digital advertising market.