Verizon, the largest wireless communication service provider in the United States of America, announced the creation of a new division — Oath — that will house the newly acquired Yahoo and AOL. Verizon bought AOL in 2015 for $4.4 billion. Its acquisition of Yahoo is expected to complete by the end of June 2017. The deal is pegged at $4.8 billion, five times Yahoo’s cash flows.
Tim Armstrong, the head of AOL who helped spearhead the Yahoo acquisition, on Monday tweeted:
— Tim Armstrong (@timarmstrongaol) April 3, 2017
The two acquisitions by Verizon are looking to break the duopoly in digital advertising by Facebook and Google. Currently, the digital advertising landscape is a duopoly owned by Google and Facebook. Digital research firm eMarketer predicts that the two companies will net nearly 46.4 % share of $106 billion from advertising in 2017.
Yahoo, known for its search, mail and content business, continues to be one of the biggest and most known brands on the Internet. With the acquisition of AOL and Yahoo, Verizon will have access to consumer information and data of nearly one billion users across brands, bringing it closer to Google and Facebook, which have one billion and 1.86 billion users respectively.
Meanwhile, AOL is one of the early movers in the digital advertising business and has invested heavily in media brands and digital ads technologies across television, Internet and mobile. But only controls one percent of the total global digital advertising. It also owns major content brands such as the Huffington Post, Engadget, Techcrunch, etc.
Why do the acquisitions matter? With the slowing growth of mobile subscribers in the US, Verizon needs to ramp up its revenue streams and find more ways of raising revenue per user using its existing networks. With the acquisitions, especially, AOL’s, with its ad technology, Verizon could put up a fight against Google and Facebook. The ultimate goal will be to deliver on and monetize the promise of digital marketing: targeting the right ad to the right person at the right time.
In India, Reliance Jio is trying to do the same. After disrupting the telecom market with its cheap data plans, Reliance is integrating its news and media business with its telecom business.