Verizon has made a bold, risky bet on the future of advertising

On July 25th, Verizon, a telecommunications giant that is also America’s biggest mobile operator, announced it would buy Yahoo’s main internet business for $4.8 billion (a price that does not include the firm’s properties in Asia or its portfolio of patents). The sum is paltry compared with Microsoft’s offer of $45 billion in 2008, which Yahoo’s management turned down, arguing that the firm was worth far more. Google and Facebook have invested heavily in technology that allows them to sell digital ads in an efficient, automated fashion. Verizon is hoping to take them on. Advertising is going through (yet another) digital transformation, meaning that marketers are not only spending more money online but also using technologies to buy ad space more efficiently, targeting their message to the specific people they are interested in.

AOL has a smoothly functioning new platform for this, but Yahoo underinvested. Verizon reckons it will be able to use AOL’s technology to sell a lot of Yahoo’s inventory of ads to marketers. All the same, Verizon will be taking on rivals whose main business is advertising, and in which they each have more than a decade of experience. It will need to move nimbly, not something telecoms firms are known for. Another reason why Verizon may struggle to challenge Facebook’s and Google’s duopoly has to do with new plans from the telecoms regulator. Internet-service providers and mobile carriers like Verizon know more about their customers than do Google and Facebook. They know their billing addresses, their precise location at any moment and all their online habits, says Harold Feld of Public Knowledge, an advocacy group.