POV: Yahoo Acquisition
Mindshare Point of View
After months of speculation Verizon has finally acquired Yahoo for nearly $4.83b in cash, slightly more than the $4.4b it paid for AOL just over a year ago. Notably the acquisition doesn’t include two of Yahoo’s more prized possessions: its stake in Alibaba Holding Groups and Yahoo Japan. Marissa Mayer’s four year effort to turn-around Yahoo’s fortunes has finally come to an end with the failure to show any significant signs of growth, despite multiple acquisitions, most notably the $1.1b purchase of Tumblr whose value was quickly written-off. However, like a phoenix emerging from the flames, Yahoo may emerge stronger as a result of the Verizon acquisition.
DETAILS AND IMPLICATIONS
Verizon has made no secret of its desire to be the global number one media technology company. The AOL acquisition was a smart means to layer more digital content, data and technology (including programmatic), and advertising opportunities on top of Verizon’s historical distribution power and data. Combined the new entity offers advertisers several benefits, most notably enhanced ID-based targeting across multiple screens and premium inventory, particularly video and mobile. The Yahoo acquisition adds more oomph to this combination in the following ways:
- More users: 600m Yahoo mobile users will now join AOL’s existing 600m. Nobody is certain how many of these users are duplicates, so it’s likely to be less than 1.2bn unique users. Nonetheless, it should give Verizon decent reach, particularly internationally where Yahoo has retained some strength and AOL is weaker.
- More data: AOL has made a big deal over its willingness to open up more of its data than Facebook and Google. With Yahoo, it now has over 165 billion daily data events it can exploit for advertisers.
- More premium content: Advertisers are keen to find better, safer places to move their TV spend. Yahoo’s roster of premium content in sports, technology and finance provides an extended safe-haven of viewable, verifiable and brand safe inventory.
However, several challenges remain in implementing the strategy:
- More targeting: While Verizon is a huge player in the USA its global footprint is weak. In order to replicate the ID-based three-screen model it will either need to acquire or partner with similar pipe-providers in other markets.
- More competition: the Yahoo/AOL combination provides a third global mobile advertising alternative to Facebook and Google, which control roughly 43% of total the world’s digital advertising revenues. Yahoo’s 1.5% contribution hardly puts a dent in that figure but Verizon will be hoping the sum will be greater than the parts.
- More programmatic: AOL has spent a lot of time and money building ONE, one of the industry’s best programmatic offers. It will now need to integrate Yahoo’s vast collection of assets, inventory, data and tech into the ONE platform, which must be doable but by when?
Yahoo, one of the oldest Internet brands and pioneers, lives on. For that, we should all rejoice. With a price tag of $5b, it’s a long way from 2000 when Yahoo was valued at $125b, or even the $44b Microsoft offered to pay for it in 2007. Nevertheless, it is an iconic brand, in many respects similar to AOL. By bundling them together and layering in some killer targeting, data and distribution paths, Verizon hopes to give Google and Facebook a real run for their money and the industry a credible, third global mobile alternative. Yahoo!