Largest US wireless service provider, Verizon has entered into an agreement to purchase Yahoo’s core internet business in a deal worth $4.8 billion. Subject to shareholder and regulatory approval, the transaction is likely to close in the first quarter of 2017.
Verizon has been making efforts to make its presence felt in mobile advertising and content markets in the last two years. The company invested in internet TV providers, OnCue and content delivery networks, Edgecast. Verizon also acquired AOL in a $4.4 billion deal, which provided it access to a programmatic and video advertising platform besides a library of original content. Yahoo! will provide it access into the search engine and native ad market. Yahoo’s key advertising assets include Gemini and Brightroll, programmatic buying and selling tools for video, display and native advertising.
Acquisition of Yahoo makes sense for Verizon as the US’s wireless market is slowing down while digital advertising is gaining ground. It is no longer just an add-on but a critical part of any enterprise’s outreach plan. Advertisements are moving from traditional media to new and dynamic digital outlets. Verizon’s subscriber base of 112 million can provide a captive audience and thus justifying its move to acquire Yahoo. USA’s mobile ad spending is likely to grow by nearly 40% this year to reach $43.6 billion and is likely to overtake TV ad spending in the coming year, as per eMarketer report.
Yahoo boasts of nearly a billion active users on various properties such as Search, Mail, Finance and Tumblr. It also has significant mobile users, which can form base of mobile advertisers. Combined with Verizon’s and AOL’s customer data, it can together provide better data for targeted advertisement and thus better realisation for advertisers. Yahoo is also one of the few portals which has invested in unique content. At the same time there is going to be some overlap with AOL’s operations.
Verizon might find it tough to integrate Yahoo’s operations with its existing operations. Yahoo’s business has been in decline for a few years now. Verizon is one of the few service providers which is trying to reinvent itself to compete with internet giants like Facebook and Google. With Yahoo, Verizon might be putting its foot in the door in internet and mobile advertising ecosystem.