Verizon's Go90 video streaming app is part of its digital media and advertising push. Image source: go90.
Digital advertising is booming, but there are only two companies dominating the space: Facebook and Google, a unit of Alphabet . The two technology giants accounted for a combined 43% of global ad spending last year.
Tim Armstrong thinks he can break that duopoly as the head of Verizon's digital media efforts. Verizon is slowly building out a digital media business through strategic acquisitions, and it could leverage its wireless and in-home service subscriber data to produce better ad targeting and measurement for marketers and brands. Armstrong believes Verizon could generate $10 billion to $20 billion in revenue from its digital media segment by 2020.
Marketers are eager to diversify away from Google and Facebook. Here's why Verizon could be the answer.
Verizon has over 100 million wireless subscribers, and it has the full name, address, and Social Security number of most of them. It also likely has credit card information on file for its customers. Facebook or Google would be lucky to have anything more than a user's full name -- although they do have access to the activities users perform on their websites like status updates and searches.
But Verizon has access to users' web browsing data as well. As a wireless internet provider (and a home internet provider to many), Verizon is capable of tracking its subscribers' web behavior across the entire internet. It implemented a cookie-like tracker in 2014 to gather browsing data for every unencrypted website a user visits. Almost nobody else, not even Facebook or Google, is able to get the same kind of data on its users.
Of course, Verizon's superior data is limited to its U.S. subscriber base. Facebook and Google operate globally and have billions of users across all of their properties. Verizon pales in comparison, with just over 100 million subscribers. Its digital media properties see 700 million visitors per month, but the data tied to those visitors is often less effective for targeting compared to the user data Facebook and Google can collect.
Verizon may be able to expand its audience through its own new products like its Go90 mobile video platform or future acquisitions. The company may be able to leverage its smartphone and internet subscriber data to produce lookalike audiences to infer targeting data about digital media visitors, but it won't produce the same results as its actual subscribers.
Still, Verizon's data on its relatively small subscriber base could help it attract marketers to its ad platform and help it scale the business further.
Another advantage of being a wireless service operator is that Verizon is able to track its customers' locations, irrespective of consent. So, if a subscriber sees an ad for a new donut shop, and shortly after visits that donut shop, it's a strong indication that the ad drove the sale.
Again, this is limited to Verizon's wireless subscribers, which represent a much smaller user base compared to Facebook, Google, or even its own digital media audience. Still, it's a capability that's unmatched by the two behemoths of the digital ad world.
Facebook has adapted its Atlas ad platform to more effectively track ad conversions. Facebook says Atlas can track sales online as well as in stores to determine how effective a campaign worked even if it was executed across multiple platforms (e.g., Facebook, Instagram, and Facebook Audience Network). Google, likewise, uses its DoubleClick platform to show the effectiveness of ad campaigns across both Google ad products and participating third-party ad inventory sellers.
But advertisers have become wary of using end-to-end solutions from a single company. Facebook and Google are both pushing marketers to use their tools for everything in the ad-buying process. Verizon is open to letting advertisers use third-party tools with its ad platform, which may make it more attractive to digital marketers.
Google and Facebook's dominance will be tough to break. Verizon has valuable data and digital media assets it can use to attract advertisers, but it will need to expand its wireless subscriber data to become a serious threat. If Verizon can reach the mid-range ofArmstrong's 2020 goal of $10 billion to $20 billion in digital advertising revenue, it would represent a significant revenue stream for a company that brought in $132 billion last year.
The article Can Verizon Take On Google and Facebook's Digital Advertising Duopoly? originally appeared on Fool.com.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Adam Levy owns shares of Verizon Communications. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Facebook, and Verizon Communications. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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