Write-down of Oath operations
In the fourth quarter, Verizon (VZ) expects to write down the value of its Oath media unit by $4.6 billion as a result of competitive pressures in the digital advertising business. In addition, Verizon believes that the benefits of integrating its AOL and Yahoo properties were lower than expected.
Verizon, the largest wireless service provider in the United States, spent $4.4 billion to acquire AOL in 2015 and $4.5 billion to acquire Yahoo in 2017 as part of an effort to compete with Facebook (FB) and Alphabet’s (GOOGL) Google for digital media advertising dollars.
Verizon’s Oath operations reported a revenue fall of ~6.9% YoY (year-over-year) to $1.8 billion in the third quarter, which represented ~5.5% of Verizon’s consolidated third-quarter revenue. At the same time, Oath’s media unit dropped its target of generating $10 billion in annual revenue by 2020, as it’s struggling with weakness in its search and desktop products, which account for most of its revenue.
Top digital advertising platforms
Based on eMarketer estimates, Facebook and Google are expected to capture ~20.6% and ~37.1% of total digital advertising spending, respectively, in the United States in 2018. Oath and Amazon (AMZN) are expected to capture ~3.3% and ~4.2%, respectively.