AOL and Yahoo gave Verizon digital advertising technologies
Plans for an online television service are only part of Verizon’s (VZ) media push. Earlier this year, the company completed its acquisition of Yahoo’s web properties for $4.5 billion only a few years after it acquired AOL.
The acquisition of Yahoo and AOL saw Verizon harvest important advertising technologies. With Yahoo and AOL under its wing, Verizon has created a digital media and advertising unit called Oath.
$129.2 billion in the US online advertising industry
In the media push, Verizon is eyeing the digital advertising market—the domain of Alphabet’s Google (GOOGL) and Facebook (FB). According to eMarketer, digital ad spending in the US will reach $83 billion this year and continue growing to reach $129.2 billion by 2021—a revenue opportunity that Verizon, and even its wireless rival AT&T (T), are eyeing in their media pushes.
AT&T is seeking to acquire CNN owner Time Warner (TWX) just a few years after it acquired satellite TV provider DirecTV and proceeded to launch an online video service called DirecTV Now.
Oath’s annual revenues expected to reach $10 billion by 2020
Expansion in the digital media and advertising industry could help Verizon drive stronger top-line growth. In 3Q17, Verizon’s top line grew 2.5% YoY (year-over-year), compared with top-line growth of 24% and 47% YoY recorded by Alphabet and Facebook, respectively, in the same quarter.
As growth has slowed in Verizon’s core wireless business because of a saturated wireless market in the US (SPY), there’s a need for Verizon to try to accelerate the diversification of its revenue streams and digital media and advertising is a promising industry. Verizon has high hopes in its media push, with the company anticipating that its media unit Oath would generate $10 billion in annual revenues by 2020, up from roughly $7.0 billion expected this year.