Is Verizon Forging Ahead With Digital Media Expansion Plans?

As per a recent Bloomberg report, U.S. telecom behemoth, Verizon Communications Inc. VZ, is looking to take over some major companies in the digital media space. The company is systematically diversifying its business model into the digital media platform, targeting the lucrative segments of digital advertising and content creation as well as distribution.

In Jun 2015, Verizon took over AOL Inc. for $4.4 billion. The acquisition of AOL has not only expanded Verizon’s mobile-video offerings, but also provided an access to its state-of-the-art advertising technology which enables automated buying and selling of ads online. In the same year, Verizon acquired Millennial Media whose targeted ad technology, along with AOL’s online content and consumer data platform, has been integrated into Verizon’s massive subscriber base to provide a powerful targeted mobile ad platform to advertisers.

Millennial’s targeted ad platform, combined with substantial data from Verizon, will aid AOL improve the targeted ad business for mobile and desktop website publishers. Further, the company has merged its existing advertising programs, Relevant Mobile Advertising and Verizon Selects, with AOL Advertising Network.

Verizon’s existing ad programs collect personal data related to its users, which the company now shares with its subsidiary AOL. The combination of these two ad technologies provide valuable information to advertisers and allow them to effectively post their advertisements on AOL’s web sites and most importantly through Verizon’s latest Go90 mobile video service. With this service, Verizon is set to become a formidable challenger to giants like Alphabet Inc. GOOGL and Facebook Inc. FB in the mobile video advertising space.

Meanwhile, after Yahoo! Inc. YHOO disclosed another case of data breach on Dec 14, experts now believe that its recent acquisition deal with Verizon for $4.83 billion may have been jeopardized. This was Yahoo’s second revelation of a hacking scandal that might have affected 1 billion of its customers. In Sep 2016, Yahoo had reported data breach of 500 million users during 2014. Notably, there are speculations of a billion dollar discount in the purchase agreement between the parties in the wake of the disclosure.

Mobile video advertising is gradually shifting from the simple selling of banner ads on the mobile Web to automated or programmatic ad selling. Verizon is becoming a leading company that sells mobile ads across numerous websites and applications. Its advertising platform is designed to monetize applications for publishers and developers through the use of data-driven ad targeting.

Price Performance of Verizon

Year-to-date, the stock price of Verizon has witnessed a growth of 13.09%, underperforming the Zacks categorized U.S National Wireless industry’s growth rate of 21.55% in the same time period. Nevertheless, Verizon has a very powerful diversified business model. In the wireless front, it will start initial deployment of the upcoming 5G network in 2017 while on the wireline front, the company is aggressively expanding its fiber-based footprint. In the digital media front, Verizon has become a major contender for the lucrative online advertisement business. We believe these are primary reasons for the stock currently carring a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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