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How Verizon’s Oath Segment Could Be an Opportunity for Expansion

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Verizon takes over Yahoo’s core properties

After eleven long months of uncertainty—including a couple of data breaches and numerous negotiations—Verizon Communications (VZ) finally completed its acquisition of Yahoo’s core Internet assets for $4.5 billion in June 2017. Yahoo’s assets are combined with those of AOL, which Verizon procured two years ago for $4.4 billion and formed Oath, a new online media and advertising subsidiary.

Oath’s assets position Verizon to increase its addressable market from millions to billions. Verizon’s management aims to grow revenues from $7 billion to $10 billion by 2020 and has highlighted that Oath’s objective beyond that would be to attain $20 billion.

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Verizon optimistic about digital media

The AOL and Yahoo properties complement each other, with Yahoo adding immense technical capability and AOL providing great ad-tech and sales capability. With growing competition in the traditional US wireless market, Verizon aims to build an online ad business like Facebook (FB) and Alphabet (GOOGL), which currently dominate the US digital ad money space. Yahoo intends to lower the size of its board of directors and rebrand itself as Altaba after the Verizon acquisition.

Meanwhile, Verizon’s core business has been declining. The telecom company’s wireless component generated revenues of $89 billion in 2016, which represents a fall from the previous year. The company is trying to step up its digital ads business to offset dwindling growth in its core business.

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