The relevance of Verizon’s $4.8 billion acquisition of Yahoo last week, stretches far beyond the size of the buyout or the end of the Yahoo business, it points to a shift in global marketing, and potentially the beginning of the end for television advertising.
While many in the tech community relish of the former Silicon Valley darling’s downfall, the real importance of the purchase lies in the strategy shift for Verizon and the new nature of its business.
In purchasing Yahoo’s core business, on the back of last year’s purchase of AOL, Verizon has created a viable third competitor for global digital advertising dollars, currently dominated by Facebook and Google. The new combined entity of Verizon, AOL and Yahoo will become the second most visited set of web properties in America, just behind Google. However, Verizon has a unique advantage, that will be compelling for advertisers – it knows more about its users. As a telecomms provider, Verizon knows user’s precise locations and online habits, which presents potentially compelling opportunities. Advertisers will theoretically be able to target consumers at an incredibly niche level, including making offers when they walk into a competitors store, or creating precise offerings for those who have never purchased from them before.
Verizon has proven it has no issue with stretching privacy regulations, as it’s use of “zombie cookies” shows. The firm was forced to pay a fine in relation to the use of this technology, which allowed the tracking of online browsing history is even when the user has opted out. It was also proved that this information was then shared with other businesses.
The strategy to simply purchase traffic, may be seen as shortsighted, but as digital advertising continues its exponential rise – expected to top the $200 billion global TV ad market within two years – and taking into account Facebook and Google’s dominance, Verizon had little choice but to act as quickly as possible.
Quarterly earnings released by both Facebook and Google last week, demonstrated the importance of digital advertising. Facebook achieved the best growth numbers with 63% increase on the previous quarter, but Google’s overall dominance is still beyond question, with 50% more total revenue than Facebook, including $3.8 billion of additional revenue in the last quarter alone.
With the major players locked in a long game for what will seemingly be the dominant form of advertising over the next decade, it will be interesting to see if Verizon, traditionally slow to move and adapt, will be able to take Yahoo, with a similar reputation, and create a group that can act with speed and innovation. Marks Zuckerberg spoke of the importance that video will have an the future of online advertising, but that pales in comparison to the impact created by the mass transition from desktop to mobile, and there is a significant chance that – if they get it right – Verizon could put themselves in pole position for what will likely be the most important shift in media for the last 50 years.