Yahoo is up for grabs and two of the largest telcos in the U.S. have shown keen interest in buying the long-beleaguered web giant. There are several reasons why mobile carriers Verizon Communications and AT&T have bid to acquire Yahoo, but underlining those reasons are their data monetization goals. Telcos across the globe are investing in ways to turn their data exhaust – the information generated when enabling things like phone calls and location services for things like mapping apps – into dollars.
Even though revenue from mobile data for streaming video and other purposes is up, telco industry revenues are flat or falling, according to analyst firm 451 Research. The firm reports that over the past few years revenue is down 40% across 40 of the largest global mobile operators. As the growth of new mobile subscribers dwindles, telcos have investigated a variety of new revenue streams generated from the information they have about current customers, including data on home addresses, demographics and the physical locations of subscribers' phones and devices.
Their earliest attempts at packaging and selling data have catered to marketers. Some telcos have already partnered behind-the-scenes with companies including SAP and lesser-known German data firm Zeotap to help them deploy aggregated customer data for ad targeting, measurement and broader consumer insights.
"I continue to see mobile operators, in particular, understand the value of what they have in terms of subscriber data," said Rich Karpinski, principal analyst, mobile operator strategies at 451 Research. "I think that's a real opportunity; larger telcos will not only attempt to play in this but have success," he said regarding telco data monetization. The research firm refers to the burgeoning sector as TDAAS, or telco data-as-a-service.
Some observers believe Verizon is the most likely to score Yahoo, in part because the company already is garnering similar experience through its recent acquisition of AOL. AOL evolved from early web content portal to ad tech giant over the same period as Yahoo and, to a less-successful extent, Microsoft's MSN. The potential for Verizon to grab Yahoo on top of its May 2015 acquisition of AOL and subsequent September 2015 purchase of mobile ad firm Millennial Media could be a major setback to telco competitors such as AT&T as they seek ways to generate revenue from their data through new ad and marketing services.
While there are many potential uses for telco data across a variety of industries, advertising is tailor-made for telco data. Though such data typically is shared after being stripped of personal identifiers, mobile operators can link physical location via phone tracking systems to actual people and their real-world billing addresses which can be readily tied to demographic data, consumer purchase data and other information advertisers cherish.
AOL Is Integrating Verizon Data Already
The AOL acquisition brought Verizon ready-made systems to take its data to advertisers and marketers, in addition to supplying Verizon with seasoned digital ad sales staff. And Verizon has wasted no time integrating its data for advertising purposes. In March, AOL told Ad Age it had begun to integrate aggregated consumer insights data from Verizon's Precision Market Insights service, making it available in a closed beta to select AOL advertiser clients. The PMI information about segments of consumers is being used to enhance the many layers of data AOL already uses for advertisers. PMI remains a distinct division within Verizon.
PMI uses location data generated by Verizon Wireless-enabled devices to determine demographic and other information about people in certain locations and connect it to other places those people visited. The end result is anonymized data showing, for instance, what portion of an audience segment attended a ball game then visited a sponsor's pizza place during a specific period of time afterwards.
The AOL Platforms team recently also began ingesting the PMI data into its existing algorithms in the hopes of refining how ad campaigns are optimized and measured for advertisers, the company told Ad Age in March.
451 Research also suggests that Verizon is benefitting already from its new targeted ad revenue through the AOL acquisition. The research firm pointed to Verizon's Q1 2016 earnings report showing AOL ad unit revenue turned what would have been a 1.5% top-line loss that quarter into a 0.6% gain for Verizon.
Mobile operators are exploring new subsidized services that target offers and ads from sponsors in exchange for underwriting user costs. For Verizon, AT&T and other mobile operators, having digital and mobile ad platforms and email marketing capabilities like Yahoo's would come in handy for targeting offers or actual ads customers could view in exchange for more streaming data. Yahoo offers search, display, video and mobile ad technologies including programmatic ad buying.
Verizon's acquisition of AOL and the potential Yahoo buy are also content plays, providing lots of content for targeted advertising, especially in video, which drives premium ad prices and higher data use. AT&T purchased DirecTV in May 2014, giving AT&T's AdWorks service new reach to millions of addressable TV households. Analysts also suggest that, like AOL, Yahoo's massive digital audience and breadth of video content and video ad capabilities are especially attractive to telcos as they attempt to own more of the streaming content data value chain.