Verizon Said to Weigh More Media, Ad Deals Amid Yahoo Turmoil

  • Strategy requires millions of users to stoke ad revenue
  • Pandora, Twitter may make sense as targets, BTIG analyst says

What Are Verizon's Real Options on Yahoo Deal?

Verizon Communications Inc.’s deal with Yahoo! Inc. has hit a rocky patch, but the phone giant is forging ahead with a strategy focusing on mobile advertising and still has appetite for more deals.

Whether or not the $4.83 billion Yahoo deal goes through, the company is likely to look at purchasing digital media companies that could drive more traffic for Verizon’s advertisers, a person familiar with the company’s strategy said, asking not to be identified discussing private information. The snag over revelations of data breaches at Yahoo hasn’t caused Verizon to waver in its commitment to building an advertising business that can rival Facebook Inc. and Alphabet Inc.’s Google.

Verizon is betting that the future of video is mobile and is building a business to help advertisers target phone users by taking advantage of a wealth of data about their habits and preferences. To prime that pump, Verizon needs viewers -- millions and millions of viewers.

The problem is that very few other companies have the user traffic and advertising know-how that Yahoo offers Verizon. Pandora Inc. and Twitter Inc. are among the few that might qualify, said Walt Piecyk, an analyst with BTIG LLC.

“Verizon is looking to add scale in 2017 and there are not many options left, which could even increase the attraction of companies like Pandora or Twitter,” Piecyk said.

Verizon declined to comment. Pandora and Twitter didn’t immediately respond to requests for comment.

The $4.4 billion purchase of AOL Inc. gave Verizon media, ad technology and users. Verizon’s interest in Yahoo is focused on the billion people who visit its sites including about 225 million active e-mail users. The status of that deal is in question due to the revelation Wednesday of a second breach and the theft of data from 1 billion user accounts. Verizon is now weighing whether to seek a lower price or back out of the deal, Bloomberg News reported Thursday, citing a person familiar with the matter.

Verizon’s most prominent entertainment investment so far has been go90, a free, YouTube-like video streaming service targeted at teens and preteens. The service hasn’t been a huge hit, so other media platforms that get more viewers could be attractive for Verizon.

“Unfortunately, there aren’t a lot of big properties out there to be had,” said Craig Moffett, an analyst at MoffettNathanson LLC. “At a time when Google and Facebook so thoroughly dominate the ad-supported online business, it’s the nature of the game in new media that Verizon will have to focus on relatively small companies.”

Verizon’s media strategy contrasts with that of its archnemesis AT&T Inc., which bought satellite provider DirecTV last year and is acquiring Time Warner Inc. in an $85.4 billion deal that will make the phone carrier one of the biggest producers of TV shows and movies in the world. Verizon told analysts in a meeting in New York this week that it isn’t interested in old media like CBS Corp. and reiterated it that satellite TV distributor Dish Network Corp. isn’t part of its plans.

If the Trump administration creates a more permissive regulatory environment for big mergers than the Obama administration, it’s possible Verizon could go after bigger quarry, Piecyk said. In the meeting this week, he asked Verizon Chief Executive Officer Lowell McAdam if there was interest in a deal with cable provider Charter Communications Inc. McAdam told Piecyk the pairing would make “industrial sense,” but he didn’t elaborate.

If Verizon decides it makes sense to expand its TV or broadband services nationally, it could opt to acquire another network operator, said Amy Yong an analyst with Macquarie Capital USA Inc.

“I think they could go for distribution companies like Charter, Dish or fiber assets to accelerate 5G,” said Yong. Dish declined to comment, and Charter didn’t immediately respond.

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