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Why Verizon Wants to Be a Key Digital Advertising Player

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Verizon takes over Yahoo’s core properties

Earlier in 2017, Verizon (VZ) completed its $4.5 billion acquisition of Yahoo’s core Internet assets after 11 months of uncertainty, two data breaches, and many negotiations. Yahoo’s assets are combined with AOL, which was procured two years ago by Verizon for $4.4 billion to create a new online media and advertising subsidiary named Oath.

During the recent Verizon 3Q17 earnings conference call, management highlighted that Oath generated $2 billion in consolidated total revenue in 3Q17. The Oath team was executing on more than 20 integration work streams in 3Q17, and management reiterated expectations to realize $1 billion in operating expense synergies through 2020.

Oath’s assets position Verizon to expand its addressable market from the millions of wireless and wireline customers to the billions of global content consumers. Management also stated that Oath expects to increase its revenue from $7 billion currently to $10 billion by 2020. It noted that Oath’s goal beyond that would be to achieve $20 billion.

Verizon is optimistic about digital media

AOL and Yahoo assets complement each other, with Yahoo adding technical capability and AOL offering sales and ad-tech capability. With competition intensifying in the traditional US wireless market, Verizon is focusing on becoming a key digital advertising player like industry leaders Facebook (FB) and Alphabet (GOOGL). Yahoo intends to lower the size of its board of directors and rebrand itself as Altaba after the Verizon deal.

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