6 Questions Marketers Have for AOL-Owner Verizon as It Buys Yahoo – Wall Street Journal
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 Google. 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?
Brian Leder, senior vice president, head of media investments & partnerships at the agency Publicis.Sapient,
said that the combined consumer data from Verizon, AOL and Yahoo could be a killer asset, if the company is able to actually use it.
“Both AOL and Yahoo have perpetually struggled with the best way to truly harness their massive volume of data insights,” he said. “Any inability [on Verizon’s part] to quickly mobilize resources around how to leverage this combined data will have significant long-term ramifications.”
The integrations will “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.
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 email@example.com