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How Oath Could Contribute to Verizon’s Growth

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Oath aiming for $20 billion in annual revenues

In the first half of 2018, Oath generated $3.8 billion in revenues for Verizon (VZ), implying an annual revenue rate of $7.6 billion. Oath aims to generate $10.0 billion–$20.0 billion in annual revenues by 2020, and it aims to reach 2.0 billion people by 2020.

Oath is Verizon’s digital media and advertising unit. This unit includes its Yahoo and AOL properties, which Verizon procured for ~$10.0 billion. Verizon’s management noted during the Goldman Sachs 27th Communacopia Conference that it’s committed to Oath’s success. The company believes there is a significant growth opportunity to be unlocked in the digital advertising space.

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Digital advertising revenues

Oath is competing with Alphabet’s (GOOGL) Google and Facebook (FB) for digital media advertising dollars. According to eMarketer estimates, Google and Facebook held 38.6% and 19.9%, respectively, of the US digital ad market at the end of 2017. In 2018, Google and Facebook are expected to capture 37.1% and 20.6%, respectively, of the US digital ad market. This market is estimated to be valued at $111.0 billion.

Google’s US digital ad revenues are forecast to reach $41.0 billion in 2018, and Facebook’s US digital ad revenues are forecast to reach $23.0 billion. Amazon (AMZN) is expected to garner 4.1% of US digital ad spending in 2018, which is ahead of Verizon’s Oath and Microsoft (MSFT). The 2018 US digital ad spending figures for Oath and Microsoft are not publicly available.

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