Verizon to Take Google and Facebook Head On

Over the past few years mobile carriers in the United States have been worried about what will happen in 2020, when their combined subscriber base will exceed the total population of the United States by more than 170 million. With multiple devices in nearly every home, that’s a definite possibility.

But what happens beyond that? How will carriers like Verizon, AT&T, T Mobile, Sprint and US Cellular grow in the next decade? With an estimated 495 million connections and only 324 million people in the country by 2020, where are they going to get new subscribers from? Assuming the population goes up by another 20 million by then, that still results in a penetration of 143%.

So the only way they can grow at that point is if they’re poaching subscribers from their competitors. But the fallout of that will be cutthroat discounting, manic marketing and a constant fear of losing subscribers to the competition. Granted that data consumption is on the increase, but the average revenue per user can’t grow beyond a point. And when full saturation hits, that component will take a beating as well.

Verizon has found an innovative way to deal with that problem – they’re going to take on Google and Facebook at the same time with the massive content network they now have after acquiring AOL’s brands and now Yahoo’s core assets.

Verizon’s Master Plan

With these acquisitions Verizon has literally bought over 370 monthly unique visitors. How did they do that? Let’s see…

In February 2016, ComScore ranked the Top 50 media companies in America according to the number of unique monthly visitors to their web properties. Google Sites came in first with 244 million unique visitors per month. Yahoo was in third place with 204 million, and AOL came in sixth with 166 million.

Now that Verizon owns both AOL and Yahoo’s chief assets, their total is now a shade over 370 million unique monthly visitors – a full 126 million more than all Google Sites combined. Google sites are the widespread network of websites that are on the AdSense program, and this is one of the biggest earning segments for Google.

What Will Verizon Do Next?

What Verizon has done is to acquire a broad range of brands that cover everything from entertainment to business to technology to politics to finance and several other special interest areas. In effect, they’ve created a content empire to rival Google Sites, and a reach that challenges the variety of the Facebook Audience Network.

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While Google serves ads to people within the AdSense network of sites as well as Google search traffic, Facebook serves them to the nearly 2 billion people on its social media platform as well as Instagram, which the company bought in 2012 when the company was valued at $1 billion.

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With the group of valuable web properties they now own and AOL’s powerful advertising platforms forming the heart of this new content juggernaut, Verizon is now in a position to fully exploit the synergies that this combination of content and platforms will bring.

And that’s the essence of Verizon’s masterplan. By buying the web traffic and the means to monetize that traffic more effectively and in a more cohesive manner, they’ve created a new revenue stream with massive potential.

Why Does Verizon Need New Revenue Streams?

We’ve already seen what mobile connection saturation can do to their business in the long run. So instead of beating a dead horse and trying to get the last few miles out of it, Verizon just went out and bought a few new horses for its stable.

That stable is now potentially going to give them tens of billions of dollars in additional revenue, so you can see why spending $4.4 billion on AOL and another estimated $4.8 billion for Yahoo’s assets is literally chump change compared to what the combined assets can earn for Verizon.

The New Verizon – Focus on Growth and Profitability

A mere five years ago, the entire online ad industry was firmly under Google’s control, their core advertising revenues for 2015 were $75 billion, of which $52 billion came from Google Sites alone. The rest was from search advertising.

Then came Facebook demanding equal rights, and in a few short years the social media giant has reached a point where it made $17 billion last year.

Naturally, Verizon wants a piece of that delicious money pie. And that’s the whole point of their acquisitions. Many analysts wondered at the time why Verizon would want a declining company like AOL in its fold, but with the acquisition of Yahoo going through this year, a much clearer picture emerges.

With hundreds of millions of people now visiting Verizon brands such as Huffington Post, TechCrunch, Engadget, Yahoo finance and so on, the AOL ad platforms will control all advertising that goes on these sites and Verizon will be the prime beneficiary of any monies generated by this conglomerate of premium content providers.

And you know what the icing on the cake is? AOL has a ten-year deal with Microsoft to place their advertisements on all of the company’s web properties, which include Windows, Xbox, Skype, Outlook, MSN and Bing.

Armed with this plan, Verizon is now ready to take on both Google and Facebook at their game. The world of online advertising in the United States will no longer be controlled by a duopoly, and it will be thrilling to watch this game play out over the next few years.

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