By Mike Shields
After months of intense speculation, Yahoo is joining AOL as
part of the Verizon Communications family. The plan, according to
AOL Chief Executive Tim Armstrong, is to build a mobile advertising
and content distribution giant, one that can challenge Google and
Facebook.
But before that massive goal can come anywhere close to reality,
here are six questions marketers and ad buyers have regarding the
triumvirate of Verizon + AOL + Yahoo.
1) Can Verizon really compete with the giants of digital
advertising?
From the outset, the math doesn't work. According to eMarketer,
Yahoo will claim 3.4% of the U.S. digital ad market this year, an
even smaller slice of the pie than in years past. AOL? 1.8%.
Compare that with Google at almost 39% and Facebook with 15%, and
it doesn't look like a fair fight. The disparity is even greater in
mobile.
Not that advertisers aren't rooting for a viable No. 3 player to
emerge. Given Google and Facebook's dominance, "you really worry
about balance," said Lou Paskalis, senior vice president and
enterprise media executive at Bank of America.
Mr. Paskalis said it would be "wonderful" for Verizon to emerge
as a true "third force." Yahoo provided "the cheapest, best scale
available," he said.
Bryan Wiener, executive chairman at the ad agency 360i, said it
was" not viable" for Verizon to compete with Facebook and Yahoo. A
more attainable goal would be to become a top five digital
advertising player -- one that gets at least consideration among
most major marketers.
"That would be a win," Mr. Wiener said.
On a conference call with analysts Monday regarding the deal,
Yahoo CEO Marissa Mayer argued that the combination creates a
formidable competitor. "What we really see here at the very first
blush is a lot of scale, unprecedented scale, a lot of reach, a
great alternative to advertisers to some of the other leading
platforms to really be able to buy at scale and have incredible
audience reach," she said.
Ms. Mayer said she is staying on at Yahoo to oversee the
transition.
2) How fast can this integration happen?
"It'll take some time," said Vincent Paolozzi, senior vice
president of innovations at ad buying firm Magna Global.
"Especially anything in tech."
Besides the fact that Yahoo and AOL operate completely different
ad selling and delivery systems, as 360i's Mr. Wiener noted, Yahoo
and AOL have duplicate teams and executives in nearly every key
aspect of their businesses. With the deal not expected to close
until the first quarter of next year, how fast can the companies
unravel all those redundancies?
Meanwhile, competitors are not going to wait. For example, "What
is Snapchat going to be doing during that time?" Mr. Wiener
asked.
3) How has Verizon been selling AOL since that deal
happened?
Some advertisers say that even a year after Verizon closed the
$4.4 billion acquisition of AOL, they are still not clear how the
two companies have combined all of their data and ad products.
"I don't know we've seen that really come to fruition on AOL
yet," said Chris Copeland, president of the ad tech firm Yieldbot,
who previously served as chief digital officer at GroupM Next, a
division of WPP.
Others say those plans are starting to finally come to light.
Steve Carbone, managing director and head of digital and analytics
at the media buying firm MediaCom, said that Verizon has recently
talked about how brands can run ads targeted to custom consumer
segments on multiple devices using data stitched together from its
wireless subscribers, Fios customers and AOL users.
"It's been impressive," he said. "The addition of Yahoo into
Verizon and AOL brings more technology assets to the combined
entity around video and mobile, which will help to strengthen them
in that area."
4) What about privacy concerns?
"Verizon knows where you are," said Mr. Wiener. "In some cases,
AOL and Yahoo know who you are. The huge missing piece is how is
Verizon going to actually bring that to life in a way that isn't
going to freak out its cell subscribers. It's a tightrope."
Verizon says it uses a wide variety of data to show consumers
highly relevant ads, such as their postal and email addresses,
their mobile web browsing history, as well as data from AOL's sites
and third party advertising partners. But the company says it never
uses any data that identifies an individual directly, like their
names.
"We do not share information that identifies you personally as
part of these programs other than with vendors and partners who do
work for us," Verizon says in its privacy policy.
5) Many Verizon customers don't interact with the company
directly on a regular basis. And AOL and Yahoo are not mobile
leaders. How does Verizon become a daily mobile habit?
As of Monday, neither Yahoo nor AOL could boast of a top 100 app
in the Apple App store, according to the analytics firm App Annie.
The closest contender is Yahoo's Tumblr, which is ranked at
102.
"AOL, Yahoo are not the future of apps or social," said
Yieldbot's Mr. Copeland. Thus, Mr. Copeland said he could see
Verizon maybe looking to make another major acquisition, such as
Twitter or Pinterest, to better establish a direct consumer
relationship with people on mobile devices.
"Even being a carrier, Verizon doesn't give you a reason to go
to their property every day," he said. "And where is that in this
new mashup?"
(Pinterest and Verizon declined to comment on such deal
speculation, while Twitter didn't immediately respond to a request
for comment.)
6) Here's the tougher question: Does Yahoo perhaps have somes
underrated assets?
Yahoo's email product, which some consumers have used for
decades, can yield powerful data for advertising, say ad buyers.
Same for Flurry, the mobile ad tech firm Yahoo purchased in 2014.
Flurry's software is plugged into thousands of apps, providing them
with analytics and ads. "Those data sets are really exciting to
us," said Mr. Paolozzi.
When things really get interesting down the road, Mr. Paolozzi
argued, is if Verizon can take its powerful data sets to TV
advertisers. Already, AOL has established a modest footprint in
this area as the TV ad industry slowly moves into programmatic.
Write to Mike Shields at mike.shields@wsj.com
(END) Dow Jones Newswires
July 25, 2016 15:35 ET (19:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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