Verizon Completes It’s Web 1.0 Roll-up, But May Not Stop There

With its $4.8 billion acquisition of Yahoo this week, coming a year and two months after its $4.4 billion acquisition of AOL, Verizon now owns the two dominant players in the web ecosystem — circa 1999. But at least it got them cheap.

Yahoo once had a market cap of $125 billion; AOL’s reached $224 billion in the immediate wake of its January 2000 acquisition of Time Warner — roughly the same as Verizon’s market cap today. So, scooping up both for less  $10 billion could be considered a steal.

YAHOO_headquartersThe question is, why bother? Neither AOL nor Yahoo is exactly dominant in its market today. In Yahoo’s case, it isn’t even clear what that market is. Even in announcing the sale to employees, Yahoo CEO Marissa Mayer could barely articulate a coherent description of what it is Verizon was buying, let alone why.

At best, Verizon is getting, in AOL and Yahoo, a disconnected assortment of online media properties and a pair of online advertising businesses built around display, rather than search, social, or mobile — the dominant modes of digital advertising today. While Verizon’s distribution reach in mobile may be able to breathe some new life into some of those media assets it has a long, long way to go before it could seriously challenge Facebook and Google, the dominant players it today’s digital media distribution and advertising ecosystem, if that’s really its goal. Read More »

Competing With Free

The RIAA reported had some good news and some not-so-good news this week about the state of the music business. The good news is that while sales of CDs and permanent downloads continue to fall, revenue from paid-streaming subscriptions through the first half of 2015 was up a solid 25 percent from the first half of 2014, to $478 million. The not-so-good news is that the number of Americans actually paying for music subscriptions is growing much slower, up a sluggish 2.5 percent, or 200,000 subscribers, to 8.1 million.

Optimists noted that the first-half data did not include Apple Music, which launched June 30th, and that second-half numbers should be show faster growth. The New York Post reported this week, citing “music industry sources” that 15 million people had signed up for Apple’s paid-streaming service during the three-month free trial RIAA_paying_subscribersperiod, which ends Sept. 20th, and that roughly half those folks — 7.5 million — had not (yet) turned off the automatic payment feature the will soon turn them into paying subscribers. It wasn’t clear from the report, however, how many of those 7.5 million are in the U.S.

The optimists also note that while the number of paying subscribers was relatively flat, average revenue per subscriber was up 21.6 percent, to $118, perhaps reflecting a shift by consumers to more expensive services like Jay-Z’s Tidal.

Yet while growth in the paid-subscriber base flags, free, ad-supported streaming services like Pandora and Sirius XM continue to be hugely popular. Pandora claims to have 80 million active monthly listeners, only a tiny fraction of which pay for its ad-free tier. Due to licensing issues, Pandora is only available in the U.S., Australia and New Zealand, so the bulk of those 80 million users must be in the U.S. Read More »

Verizon Opts Into AOL

Verizon is the largest wireless service provider in the U.S. with over 108 million retail connections as of the first quarter of 2015. But as the wireless business matures, providing connectivity is increasingly a zero-sum game among the four national carriers — Verizon, AT&T, T-Mobile and Sprint — leading to price wars in pursuit of marketshare and threatening margins.

Verizon_HQVerizon’s efforts to find new ways to monetize its user base, such as through advertising, however, have met with mixed results at best. It’s use of undeletable “super cookies” to track its subscribers’ web surfing, and the sale of those data to third-party marketers, led to an outcry among consumers and privacy advocates (and scrutiny from the Federal Communications Commission), which forced Verizon to allow users to opt-out of the program.

Now though, with its $4.4 billion acquisition of AOL, announced Tuesday, Verizon is gaining a portfolio of over 100 million device IDs from consumers who have opted-into direct, content-based subscription relationships with AOL’s media properties. From a data-collecting perspective (to say nothing of the legal and regulatory implications) that’s a much safer starting point than anonymous, surreptitious tracking. But those opt-in content relationships will also provide a foundation for the launch later this year of Verizon’s own opt-in over-the-top video service. Read More »

Following the Flipboard flip-flops

Publishing The New York Times and Conde Nast each reversed its policy recently regarding aggregation of their content through the iPad and Android reading app Flipboard, and the reversals are revealing on the question of value-capture for online content publishers.

After originally allowing all digital content from The New Yorker and Wired to be pulled into the Flipboard app, Conde Nast is now pulling back. From now own, Flipboard users will be limited to a hyperlinked headline and a few sentences for stories from those publications. To read the full story, users will have to click through to the magazines’ own web site — that is, out of the Flipboard app. Conde Nast is also pulling back from its efforts to sell ads in the Flipboard feeds for the two publications. Read More »