Advertisers desperately want an alternative to the digital powers of Facebook and Google, which just reported new heights in ad sales while would-be rival Twitter posted its slowest ad growth since going public. That's why they cheered Verizon's deal to buy Yahoo for $4.8 billion, all the better to challenge the duopoly selling more than half of the country's digital ads.
"We need to create a third force," said Bank of America Senior VP-Enterprise Media Executive Lou Paskalis, echoing the words of WPP chief Martin Sorrell.
But the new combination won't be that close a third. Verizon, its AOL unit and Yahoo will sell $3.7 billion in digital ads next year, eMarketer says, surpassing Microsoft and LinkedIn's $3.3 billion but still light years behind Facebook at $12.7 billion and Google at $28.8 billion. (Microsoft in June agreed to buy LinkedIn for $26.2 billion.)
So expect a long battle to close the gap while still more rivals jostle. Facebook leads in social, but Twitter can't count on No. 2 even there, a media buyer said. "Snapchat is now second in the minds of marketers who are attracted because it's exciting and new," the buyer said.
Facebook and Google offer an "insurmountable value proposition" for marketers, said 360i Chairman Bryan Wiener, "but there is a huge amount of money out there for the rest to compete."
Marketers aren't just hoping to undermine the leaders' pricing power. They want a more open partner than Google or Facebook, which use brands' data for targeting but return little to apply elsewhere. "We have great partnerships with them, and we do great things with them, but at the end of the day, walled gardens are an existential threat to marketing," Mr. Paskalis said. "To have to fight through the fog of data that is only available within a walled garden but cannot be connected to what we do outside of it, that's a real barrier for us," he added.
So how does Verizon intend to compete? It all relies on melding AOL and Yahoo's ad tech, integrating their data on web users and offering strong content. Yahoo also brings mobile ad inroads that AOL lacks, which could complement Verizon's 100 million-plus wireless customers.
"There are a lot of pieces Yahoo brings that fill in AOL and Verizon's product suites, like unique data, search data and email data," said Jeremy Tate, VP-group director of media at Starcom. "Those are areas AOL is not as strong in. Also, original content like Yahoo Finance and Yahoo Sports are probably upgrades from what AOL has now."
Verizon has beefed up content with acquisitions from Yahoo to Awesomeness TV and with its homegrown mobile TV network Go90. The goal is more video ad opportunities on mobile devices. But Verizon CEO Lowell McAdam admitted earlier this year that Go90 "did get a little bit overhyped."
Some fear that all Verizon is doing by adding Yahoo to AOL is combining two aging internet brands. "It could be a garbage dump of acquired companies," one video ad tech executive said. Others said that rather than offering the dynamic ads that Facebook and others are building, AOL and Yahoo are still selling the oft-maligned banner ads and other lesser inventory.
There's one other big move that advertisers speculate could truly impact the landscape: a Verizon takeover of Twitter. Mr. Paskalis called Twitter the most undervalued platform out there by far. And, he added, "Verizon is on a shopping spree."