Verizon Communications Inc. CEO Lowell McAdam has confirmed that yesterday’s acquisition of Yahoo Inc. was more about content than its well-known search engine, calling it “a transaction that will make us an even stronger competitor in digital media” during the company’s Q2 conference call today.
“We are strengthening our ability to realize our mission of delivering the promise of the digital world,” he said. “We see tremendous opportunity in the digital video marketplace, which has an estimated addressable market of $180 billion [USD] by 2020… [and] Yahoo’s operations complement AOL’s business as well as our overall asset portfolio.”
But consumers are hungry for other options, he said. Verizon intends to give them a new choice – and Yahoo provides the means to do so.
“By acquiring Yahoo’s operating business, we are scaling up to be a major competitor in mobile media,” he said. “Yahoo’s operations provide a valuable portfolio of online properties and mobile applications which attract over 1 billion monthly active consumer views.”
“[The acquisition] also brings market-leading content, brands, and sports, finance, news, and e-mail into the portfolio,” he continued. “It expands our analytics and ad tech capabilities and enhances our competitive position and value proposition to advertisers.”
Beyond the acquisition, Verizon is now pursuing a three-tiered strategy in pursuit of future growth – to sustain a high level of service quality across its networks; to extend its reach through new and varied platforms; and to monetize those platforms through applications and content – and is pleased with its progress on all three fronts, McAdam said, noting that Verizon’s network leadership has remained a cornerstone of the brand since the company was formed in 2000.
Even with the astronomic growth in data use seen by the industry in recent years, studies show that Verizon’s current 4G network represents both the highest quality and reliability for American consumers, McAdam said, and the company plans to maintain that reputation as it upgrades its network to 5G.
Meanwhile, the company’s user base has grown from 25 million in 2000 to 110 million today, with the majority of customers now using wireless for data services, he said: last year alone, the company’s network use increased by 44 per cent YoY.
“We carry the same amount of traffic on our network in one hour today as we did 10-plus years ago in one week,” McAdam said.
The next step is for Verizon to monetize that network so the company can further evolve its services, he added – and acquiring Yahoo will allow it to do so in a less capital intensive manner than its competitors.
As for the future status of his new division’s executive leadership, during the first part of the call McAdam did not mention Yahoo’s current CEO Marissa Mayer, though he did note that in the months ahead Verizon’s focus will be on integrating the two companies, and hopefully closing the acquisition by early next year.
Asked later about his plans for the company, McAdam said he looked forward to collaborating with Yahoo’s “very talented team,” noting that his intent was for the company to be run separately from Verizon, with a focus on expanding its customer base through both new ventures and existing services such as Yahoo Finance.
“We should be looking for additional things to meet customers’ needs… and I fully expect that when [AOL CEO] Tim [Armstrong] and Marissa [Mayer] put their heads together, we’ll have a long list,” McAdam said. “We’ll be disciplined as we always are. And they’ll be good investments that’ll drive us to take a larger share of this growing market.”
Our thanks to investment research platform Seeking Alpha for the transcriptions from Verizon’s July 26 Q2 earnings call.