Verizon Plays The Long Game With Oath
It’s amazing what a little long-term perspective will do. Yesterday in their earnings call Verizon’s ad unit Oath posted a 7% decline in ad revenue YoY. The decrease was caused by Oath’s lagging search and desktop browser businesses. For many pubs hanging a -7% rev performance would cause heads to roll, but Verizon isn’t sweating the near term dip. Instead the telco is bullish on Oath’s future, predicting that ad rev will surpass $10B by 2020 – which would be more than a 20% increase in just two years.
So why the short-term patience and long-term optimism? Oath is right in the middle of the strategic pivot which will completely overhaul their business. They’re sunsetting the legacy ad model inherited from their AOL and Yahoo roots, and are trying to become a distributor of data via their own DSP. The key to making this happen is Verizon’s investment in 5G – which they’ll begin testing in 2019. As I’ve reported in previous posts, 5G has the potential to revolutionize home internet delivery. Verizon is leading the telcos in the 5G race, and plans to use Oath as the ad arm to monetize all this new internet usage they’ll steal from traditional fiberoptic ISPs like Comcast, AT&T, etc..
With that plan in mind, it’s easy to see why nobody’s really sweating a short-term -7.