Verizon lifts the lid on why it bought Yahoo – it’s about mobile video

By snapping up Yahoo, Verizon is gaining online portals and mobile apps which attract over one billion monthly active consumer views, that could go some way to establishing incremental advertising revenue from a mobile market where profitable growth is hard to come by for telcos.

“Today, that marketplace is dominated by two brands,” explained Lowell McAdam, the chief executive at Verizon on its quarterly earnings call yesterday evening (26 July). “Content creators and advertisers are hungry for alternatives as the market expands for both in-home and mobile consumption. Verizon intends to be a significant player in this space.”

While details are being kept under wraps for now, McAdam couldn’t help but tease his company’s plans for sports, one of three areas alongside news and finance that “partners” have already shown “enthusiasm” for the Yahoo deal. He described the proposition as “waterfall of content” for the likes of the NBA and NFL “moving down through our different properties”, whether that’s traditional channels but also through AOL and Yahoo.

“People are accessing all of this content via their mobile device,” he continued. “And we'll be one of the few that can deliver advertising and content across the home, across the mobile device, and across the internet. And we think that puts us in a very strong position.”

That strength will be channelled through advertising; partnerships and ad tech to be precise, which Verizon will likely be assessing and developing over the next six months.

“Now that Verizon has announced its $4.83bn acquisition of Yahoo, we'll be watching whether Verizon will use the assets to round out its own digital content offerings," said Dr. Hannu Verkasalo, chief executive of Verto Analytics.

"While only 19 per cent of all time spent on Yahoo takes place on mobile devices – by comparison, Facebook, Twitter, and Netflix are 40 per cent, 51 per cent, and 58 per cent, respectively – Yahoo's large portfolio of online assets can still get to lots of daily users. As such, their Verto Stickiness Index is 52 per cent, which is better than 41 per cent for Twitter, though behind Facebook’s 75 per cent. Yahoo’s challenge has not been the lack of engagement, it's the lack of traction and growth"

The Drum’s digital editor Ronan Shields further explored this area and pointed to the fact that most agency groups resent the duopoly of Facebook and Google, setting the stage nicely for a third player to enter with a different, less restrictive proposition.

“The big advertisers have come to us, saying that they have more ads to place than they have good places to put them,” revealed McAdam. “And so you will hear from us over the next several months some partnerships and some agreements to place ads with us.

He acknowledged that talk like this has exacerbated claims that Verizon wants to break the Facebook, Google duopoly of online media, but downplayed the rivalry. “We plan on being a significant player here. The market is going to grow dramatically. We're a small player today relative to them. All we need to do is take more than our fair share of the growth of the market and this will be a success for us. And we certainly expect to do better than that,” McAdam continued.

Despite shelling out almost $5bn for Yahoo and the billions spent nabbing AOL and Millennial Media last year, further acquisitions could be on the cards. Verizon’s chief said no acquisitions would be akin to “standing still” in such a “dynamic environment”, adding that “we should be looking for additional things to meet customers’ needs

“I fully expect that when Tim {Armstrong, AOL chief executive] and Marissa [Mayer, Yahoo chief executive] put their heads together, we'll have a long list. And we'll be disciplined as we always are. And they'll be good investments that'll drive us to take a larger share of this growing market."