In July, Verizon announced its plans to purchase Yahoo for $4.83 billion, which would grant Verizon full ownership of Yahoo’s search and email properties, social networking site Tumblr, and other brands. On top of its $4.4 billion acquisition of AOL just last year, it’s evident that Verizon is looking for ways to transition from being a traditional telecommunications company to a digital mainstay.
There’s no question that Yahoo has struggled in recent years, declining from an estimated worth of $100 billion at its peak in 2000. But despite its downturn, Yahoo remains the third-largest internet property in the U.S., behind Google and Facebook. And something else to consider: the cost to acquire both Yahoo and AOL is less than Verizon’s average revenue in one month – so what would be a major risk for most companies is mere pocket change to Verizon.
But where the real advantage to these acquisitions lies is in the advertising potential. By merging Yahoo and AOL together, Verizon would have deals in place with both Microsoft and Google. Combining this with Verizon’s extensive customer database creates an opportunity to offer highly targeted ads across the web.
However, the deal was suddenly called into question recently when it was revealed that at least 500 million Yahoo accounts were hacked. And the worst part? Verizon wasn’t made aware of the security breach until two days before the information was released to the public! While it’s unsure when exactly Yahoo became aware of the hack, there’s speculation that they knew of it right around the time the Verizon deal was announced.
What it means for the future of this deal, we aren’t sure yet. There’s a possibility that Verizon could acquire Yahoo for a lower price in light of the controversy – or throw the deal out completely. Verizon hasn’t released a statement indicating how they’re going to proceed, so we’ll have to sit tight and see how things unfold.
In light of all this breaking news, let’s dig a bit deeper into what the acquisition would entail and the potential advantages to Verizon if they stick it out.
Verizon’s Expanding Portfolio
Along with Verizon’s homegrown companies, including Verizon Wireless, FiOS, and Enterprise Solutions, it would gain over 25 new brands between Yahoo and AOL’s properties. One of the most significant brands that Verizon wouldn’t obtain from the Yahoo purchase is Alibaba, one of the largest internet providers in China. Yahoo currently has a 15% stake in the company, but the investment will remain a separate entity along with brands like Yahoo Japan.
Despite Google’s dominance in the search industry, Yahoo still has a dedicated user base with over 1 billion monthly active users and 600 million monthly active mobile users. Combine these numbers with the 225 million people using Yahoo’s email service and Verizon has the potential to pass Google and Facebook in terms of unique monthly visitors.
Source: Business Insider
And don’t forget about another huge Yahoo entity: Tumblr. With a predominantly millennial audience of writers and creators, the microblogging site has 550 million monthly active users – that’s over 100 million more than Instagram.
For a company that hasn’t really focused its marketing on this generation, it could be a major opportunity to get Verizon’s other brands (especially Wireless and FiOS) in front of younger consumers. Then by the time millennials are no longer on their family’s wireless or internet plans and have to purchase their own, they may be more likely to consider Verizon because of established familiarity and trust.
An Emphasis on Search Advertising
The biggest potential gain for Verizon through the Yahoo acquisition is search advertising, especially mobile advertising, to help transition the company away from the telecom services that originally made it so successful. Between data from its wireless customers, the search engine data available from Yahoo, and the over 1 billion users visiting Yahoo’s sites, Verizon could develop and target ads more effectively – which makes for quite the bargaining chip to attract advertisers.
Yahoo’s search advertising product, Gemini, allows marketers to target a specific audience with native and keyword-based ads. Similar to Google AdWords, you can use behavioral, demographic, and geographic-based data to develop an advertising campaign that attracts the right audience for your brand.
The process to create ads in Gemini is really simple: you provide basic company information (like company name, location, phone number, etc.), choose from a variety of ad layouts that you can customize to your liking, and select your audience and advertising budget. Your ads will then be placed within relevant content your selected audience is browsing. You can refine your audience by location, search terms, interests, languages, and other factors to ensure you’re not wasting any ad dollars.
Like AdWords, you can also decide whether you want to pay for your ad based on the number of views or clicks it receives. This allows for customization based on the goal of the advertising campaign, whether it’s brand awareness, education, or purchases.
For more narrow targeting, the acquisition of Yahoo gives Verizon access to its programmatic advertising platform called BrightRoll, which allows you to target ads specifically by device type. Since consumer behavior and intent vary based on the device being used, this allows advertisers to refine their audience even further and customize ads based on the device they’re being viewed on.
What the Future Holds
Verizon is at a crossroads and needs to keep finding ways to reinvent itself to stay relevant in the marketplace. With telecom as we know it on the decline, the company is rethinking who its customers are, ultimately focusing more of its attention on businesses than individual consumers.
The acquisition of Yahoo would bring Verizon’s phone and data networks together with a search engine that has a steady stream of customers, many of whom are probably visiting from a Verizon device. This data would allow for more targeted advertising opportunities for businesses, ensuring that the most relevant content is delivered to the right audience.
Verizon must find a way to monopolize on search advertising between Yahoo’s Gemini platform and its advertising deals with both Microsoft and Google. Combining that with a rich database of customer information, as one-third of Americans have a Verizon data plan and countless consumers and businesses utilize Verizon FiOS and Enterprise Solutions, there are high expectations for what the company could offer through this acquisition.
It will be interesting to see what Verizon ultimately decides to do in the wake of the massive Yahoo security breach. Can they revive Yahoo’s already tarnished reputation or is it beyond repair? And what will be the impact on their own image if they continue with the acquisition?
What we do know is that companies of any size and industry must be able to adapt to the increasingly digital world we live in to remain competitive, and Verizon’s potential purchase of Yahoo makes it pretty clear that they’re dedicated to doing so.