Verizon

Verizon is set to buy Yahoo’s digital assets, but will the deal pay off?

By Tina Irgang

Former internet giant Yahoo has been troubled for years, and experts had long predicted that the company would be broken up and sold. Given Yahoo’s long decline, why did Verizon decide to spend $4.83 billion on the fading brand’s web business, and is the acquisition likely to pay dividends?

First, let’s look at Verizon’s reasons for the acquisition. “Verizon is building a portfolio of online content and aiming to monetize it via advertising. Its current assets include Huffington Post and TechCrunch, which it acquired in last year’s AOL deal, and its own mobile video app, called go90,” according to The Wall Street Journal.

Verizon’s growing online assets notwithstanding, it remains a big player in the digital ad market. To be exact, Verizon’s current properties hold about 1.8 percent of that market, says the Journal. Yahoo’s contribution would be another 3.4 percent. Compare that to Google and Facebook, which together account for some 50 percent.

“The odds aren’t great for challengers to Google and Facebook,” agrees Bloomberg. “But it would be healthier to have a broader set of arbiters for our digital lives, and at this point, Verizon plus Yahoo is the best shot at a No. 3 player to keep the superpowers in check.”

Even if the Verizon/Yahoo/AOL entity can claim that No. 3 spot, however, it’s still a distant third. “They’re third place in a two-player market. Ad dollars are going to Google and Facebook and they’re coming out of everyone else,” notes The Associated Press. (Also, remember that Microsoft, with its recent acquisition of LinkedIn, made a big play in the digital space.)

In a statement on the Yahoo deal, Verizon CEO Lowell McAdam also put forward another rationale for the deal: “By acquiring Yahoo, we are scaling up to be a major competitor in mobile media.”

On a call with investors, McAdam “noted that people are using their phones more than ever before (Verizon sees the same amount of traffic on its networks in an hour now as it did in a week a decade ago) and that the company has an opportunity to monetize that volume as much as possible,” according to CNN Money.

A play for millennials

In addition to its acquisition of AOL in 2015, Yahoo has also partnered with media giant Hearst to invest in “millennial-focused media companies Complex Media and AwesomenessTV,” adds CNN Money.

Evidently, Verizon’s strategy is to take the millennial audience using its mobile services and monetize it through digital content and advertising. But is that likely to pan out?

T-Mobile CEO John Legere, for one, doesn’t seem to think so. “It becomes clear that [Verizon sees] customers as units of advertising revenue,” he told USA Today. “They’re going into that game against the most powerful companies, Facebook and Google. I think it’s going to be a slippery slope for them.”

The New Yorker agrees that the deal is unlikely to be a winner for Verizon: “Tomorrow’s internet users don’t dream of using Yahoo’s properties any more than they do AOL’s. Instead, they lavish their attention on Instagram and Snapchat, Musical.ly and Spotify. And software continues to move in directions far removed from the early web, as new voice-based interfaces, on devices such as Amazon’s Alexa and Google’s Home, train us to think about the internet beyond browsers and smartphones.”

In the short term, Verizon may benefit as a result of its access to Yahoo’s audience. But looking to the future, it seems that AOL and Yahoo — along with Verizon — are set to miss the boat on yet another evolution of the digital world.

Tina Irgang is the managing editor of SmartCEO magazine and SmartCEO.com. Contact her at tina@smartceo.com.