Verizon’s shift into digital media is much bigger than Yahoo’s data breach

Verizon’s seemingly disparate acquisitions make sense, but that does not mean it will be easy for the company to become a digital media company

Verizon’s shift into digital media is much bigger than Yahoo’s data breach
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Yahoo will recover from the latest news about its email data breach that happened in 2014. Looming much larger than the breach is the post-merger challenge Yahoo faces as part of Verizon. It is what Richard Windsor of Radio Free Mobile calls the irrelevant challenge. Can Yahoo’s assets pose a relevant challenge to Google, Facebook and other digital media companies after the merger?

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In the mobile-first world, Yahoo repeatedly missed the opportunity to convert its fixed internet users to mobile. Windsor suspects that most of Yahoo’s 600 million mobile monthly active users (MAU) are Yahoo email users. Though this sized audience is not insignificant, Yahoo does not have relevant mobile engagement with multiple mobile apps. How can post-merger Verizon, Yahoo and AOL turn its billions of MAU mobile users into an ecosystem that prints money like Google with search, Gmail, Maps and Youtube and like Facebook with Facebook, Messenger, WhatsApp and Instagram?

Right now, Verizon’s acquisitions are far behind Google’s 30 percent and Facebook’s 10 percent marketshare of the worldwide digital advertising revenue. Yahoo has less than 2 percent, and AOL has less than 1 percent.

Verizon joins the exclusive billion MAU club with the combined AOL and Yahoo audience. It’s a good start, but for that to be relevant, the whole of all Verizon’s mobile assets must become greater than the sum of the parts. The whole needs to become an ecosystem that is attractive to users and advertisers. Verizon not only needs to integrate Yahoo, but it faces a turnaround to get more apps downloaded and on mobile users’ home screens. Yahoo’s management has not succeeded, and Verizon—a mobile and fixed network operator—doesn’t have the management experience to create large mobile ecosystems.

How to monetize web and mobile users

The acquisition of Yahoo and AOL is intended to diversify Verizon’s regulated fixed-line internet access business and wireless carrier business that faces increasing competition. It is clear that the company is looking for a business model to reach over the top to monetize web and mobile users not connected to its data networks. AOL, Yahoo and other companies were acquired because Verizon has neither the luxury of time nor the expertise to invent a competitive digital media business from scratch.

Verizon added attractive advertising technology for web, mobile and video with AOL’s ONE that allows advertisers to manage and measure programmatic advertising across all three screens. Programmatic advertising is the automation of the buying and selling of web, video and mobile ads using real-time bidding, ad placement and ad traffic analysis and management. Digital advertising isn’t an interesting business without massive scale, though. There are thousands of small advertising technology and ad networks selling ads to run on other web and mobile web properties and in mobile apps. Scale requires a web and mobile app ecosystem with billions of users like Facebook and Google. 

Verizon bought Intel’s over-the-top internet television streaming technology to build a cable television-like offering that serves all users connected to the fixed and mobile internet, not just its own customers. The company is reported to be in talks to acquire Vessel, a next-generation video platform founded by former Hulu CEO Jason Kilar and CTO Richard Tom.

With Yahoo, Verizon bought a large user base and popular web content. The challenge now is to integrate it into a digital media brand. Turning around Yahoo’s mobile business by producing more apps that are pervasively used and prominent on users’ home screens and building digital, video streaming, and over-the-top television networks is no small task. As Windsor said, it is a struggle for relevance.

Windsor is usually the smartest person in the room when the discussion turns to mobile ecosystems. Read his latest blog post Verizon/Yahoo – Irrelevant challenge.

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