Expert

Verizon's Acquisition of Yahoo and Tumblr: We Can Hear Them Now

By August 15, 2016 No Comments
What effect will Verizon’s acquisition of Yahoo have on the telecommunications giant, and how might the purchase affect the unique, innovative digital entities subsumed by “Big Red”?

Verizon Wireless is the largest cellular telecommunications company in the US with over 140 million subscribers and a $206 billion market capitalization. With almost half of the American population as mobile subscribers, it makes sense that “Big Red” would want to become increasingly vertical, controlling content creation which keeps eyes glued to screens and provides significant monetization.
The question is, will Verizon’s $4.8 billion purchase of Yahoo send shockwaves through the historic online portal and, even more so, through creative cult favorites Tumblr and Flickr?
Verizon is not new to the acquisition game, having bought AOL in 2015 for $4.3 billion and gaining, along with the traditional ISP, such AOL subsidiaries as Huffington Post, TechCrunch, Mapquest, Bebo and Engadget. That purchase was an attempted solution to the problem of slowing expansion.
Since the telecom giant could not count on adding new customers or squeezing revenue from existing customers through its traditional, mainly unlimited products (voice, data and messaging), the AOL purchase gave Verizon cutting edge online advertising capabilities that outmatch all competitors except Facebook and Google.
The AOL purchase also provided Verizon with the necessary linchpin for launching its own internet TV/video service, which could amount to a gigantic added revenue stream.
In the case of Yahoo and its subsidiaries, Verizon will be working with a different set of strengths and variables. While Verizon claims it will keep the Yahoo brand operationally separate from its own, the future of Yahoo Search is up in the air, as it has continuously slid further and further behind Google. On the other hand, Yahoo has some yet to be released Search-connected products and features which may affect Verizon’s decision.
Verizon and Yahoo could now enjoy a strategic synergy, with Verzion presenting data on subscribers’ cell phone usage to Yahoo’s advertisers and Yahoo reciprocally sharing its internet usage data to help Verizon sell ads directly on phones. While the FCC has fined Verizon for tracking users’ cellphone browsing and has banned cross-company data sharing without obtaining user permission, Verizon is one of many companies lobbying to ease said restrictions, and changes could happen in their favor.
As for the Yahoo-subsumed Flickr and Tumblr, their future hinges on some factors unique to the two social platforms. On the plus side each enjoys a considerable and very passionate user base, Flickr with 90+ million total users and Tumblr with close to 50 million. On the negative side, both have very independent corporate cultures which will have to coordinate with Verizon’s middle management.
In the could-go-either-way category, both are outdated platforms with a rather timeless feel, because they’ve been owned by Yahoo. It would be wise of Verizon to at least leave the two cult favorite apps alone under their Yahoo umbrella.
The attempt to makeover Flickr several years ago, and transition it into something more Instagram-like, essentially failed. And to heavily monetize Tumblr would require changes such that the service would become unrecognizable to its quirky core fan base.
Verizon has already created a strategic partnership with Google to develop services, devices and mobile apps for the DROID brand, thus allowing “Big Red” to offer a wide range of cutting-edge products combining 3G network speed with the Android mobile platform. With or without a heavily monetized Flickr and Tumblr, Verizon is going in the direction of proprietary technology for its own subscribers.
Ultimately, Verizon may be best served by letting Tumblr exist as it is. The microblogging community’s fan base may be monetizable at some point when a management genius finds a way to thread the proverbial needle. Flickr has a rougher future, as the photo sharing site has been completely eclipsed by Snapchat and Instagram, which are moneymakers, whereas Flickr face monetization challenges.
By acquiring Yahoo, Verizon bought dozens of companies, ranging from social media, video streaming and mobile messaging to virtual gaming, video conferencing and mobile analytics. The big endgame for “Big Red’ is to become an advertising giant in internet and mobile, reaching hundreds of millions – and possibly billions – of consumers. Yahoo alone claims over one billion global users, 600 million on mobile.
As beloved and innovative as Flickr and Tumblr are, they may prove to be a distraction in this much larger, more complex deal, one that looks poised to create an advertising titan.