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InContext / An inside look at the business of digital content

What’s Verizon’s master plan after nabbing Yahoo?

August 4, 2016 | By Mark Glaser, Founder and Publisher – MediaShift @mediatwit

The rumors were true, and Yahoo, one of the pioneers of the web, is now part of Verizon, the largest wireless carrier in the U.S., after an all-cash deal of $4.83 billion.

It’s a small sum for one of the most popular websites, which was worth more than $125 billion at its zenith in 2000. Many are dissecting Yahoo’s downfall, which likely stemmed from an ongoing struggle with its focus: Amazon owns shopping, Google owns search, Apple owns mobile hardware and Facebook owns photos and the social graph, as the New York Times’ Mike Isaac outlined. Yahoo insisted on branding itself as a media company when it could have focused on building out its technology, and tried to do too many things at once. The result is that it never became known for anything in particular, and did a mediocre job at everything.

But there’s still plenty of potential upside in the acquisition for Verizon. All eyes are now on the company to see what kind of strategy it will take, and whether it can turn Yahoo’s downfall into a climb to the top for itself.

Consumer Behavior and Ad Tech
Anyone who’s been paying attention knows that what Verizon was really after when purchasing Yahoo was not the brand itself. What Verizon did want was Yahoo’s 22 years’ worth of data on consumer behavior and ad technology. Verizon previously acquired AOL, another once boehmouth and now faltering web property, marking Verizon’s push into content and ad tech. Now, with the scale from the Yahoo purchase, as well as Yahoo’s “mobile applications and advertising technology for video and handheld devices,” as Bloomberg’s Brian Womack wrote, Verizon might be able to lift itself into a higher echelon on the web.

And why would it want to do this? Perhaps investing in the advanced technology of ailing web companies is a good way for Verizon to stay relevant, according to Wired’s Brian Barrett. Because Verizon is one of the largest carriers, it already saturates the market, and so growth in its traditional business is limited. Moving up in the evolving digital advertising business, though, is a way for Verizon to diversify and grow. So now Verizon — with AOL and Yahoo, both of which have sophisticated ad tech — can aim higher.

As the New York Times’ Vindu Goel and Michael de la Merced reported, “The idea is to use Yahoo’s vast array of content and its advertising technology to offer more robust services to Verizon customers and advertisers.” Verizon has the benefit of location data, although that is probably limited to Verizon users, and other Internet companies have similar data.

Taking on Facebook and Google
And let’s be clear: The duopoly currently at the top of digital advertising are Google and Facebook, both of which posses a staggering amount of data from users. They’re certified Internet behemoths. The two companies together took in 55% of the digital ad market last year, according to eMarketer. A combined Verizon and Yahoo, meanwhile, would take in six percent of the digital ad market. Verizon may have climbed a few steps on the ladder with the acquisition, but Google and Facebook are already in the clouds as Verizon finds its footing.

Does that mean Verizon should back down in digital advertising, and succumb to the fact it’ll probably never reach Google-Facebook levels? Yes and no. Trying is the only way it will continue to make a dent in the industry, especially as people spend more time on their phones. So investing in ad tech and mobile video, like Verizon’s video service go90, is a smart decision. Because “ultimately, AOL’s ad-sales technology could encourage brands to spend more money across a range of Yahoo websites and apps,” as the AP’s Tali Arbel wrote.

But Verizon will have to keep its expectations realistic. That goes not just for competing with Facebook and Google, but also for ensuring its targeting doesn’t amount to a privacy breach. It already got in trouble with the FCC in March for enabling a “supercookie.” Now, as the AP’s Arbel reported, “the FCC wants broadband providers like Verizon to seek a customer’s permission in most cases before sharing data with advertisers.” That’s not something that tech titans Google and Facebook will have to deal with because their Internet access plans are still nascent.

Bottom line: Verizon is now a serious player in ad tech and online content, with even more consumer data—but it has a long way to catch the leaders.

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