Kena Betancur/Getty Images
show image

GlobalData Technology

Providing actionable insight into the technology industry

Will Verizon’s latest attempt to extract value from Yahoo work?

Last week Verizon unexpectedly launched Yahoo Mobile, a prepaid digital wireless service that will run on Verizon’s 4G LTE network. The app-based service offers unlimited talk, text and data at a very competitive price. The tariff is $39.99 a month, with taxes and fees included.

Yahoo Mobile is mainly a rebranding of Visible, Verizon’s diminutive yet hip digital brand that launched in May 2018. Neither of these secondary brands operates any physical stores, and both run on Verizon’s 4G LTE network. Unlike Visible, however, the Yahoo brand has US and international, mass-market brand recognition. This gives Yahoo Mobile an advantage out of the starting gate, whereas Visible had to focus on building name recognition.

Yahoo Mobile was obviously created to play a significant role in bolstering the overall Yahoo universe. This is evidenced by the fact that customers are required to have a Yahoo account to subscribe to the mobile service. Customers will also get Yahoo-based perks, such as free Yahoo Mail Pro (normally $3.49/month) for ad-free email across all their devices, 1,000 GB of storage, and Account Pro for 24/7 Yahoo account customer service, all of which will help differentiate Yahoo Mobile in the marketplace.

Verizon wireless smarts can drive Yahoo

Verizon has been searching for synergies between its core communications businesses and its ill-fated AOL and Yahoo acquisitions. AOL and Yahoo were merged into Oath in 2017. However, Verizon was forced to take a December 2018 write-down of $4.6bn in goodwill for the business unit, now called Verizon Media. This was because the digital advertising business did not take off as planned. The creation of Yahoo Mobile is a logical approach to integrating the well-known though diminished Yahoo brand with Verizon’s wireless prowess.

Yahoo Mobile should give a lift to Verizon in the prepaid segment, where the company has long struggled. This is because it did not have a secondary prepaid brand without cannibalising Verizon’s lucrative postpaid customer base. This didn’t allow it to compete against AT&T’s Cricket Wireless, Sprint’s Boost Mobile and Metro by T-Mobile. Now Verizon has two prepaid brands that can target a spectrum of demographics. It can achieve this though appealing largely to digital natives who are comfortable doing everything online. Furthermore, because Yahoo Mobile and Visible are digital app-based operations, the brands’ costs for customer acquisition and retention are quite modest compared to those of more traditional wireless service providers.

Verizon is still under pressure to justify its $4.48bn acquisition of Yahoo. Using Yahoo Mobile to help immerse people in the Yahoo ecosystem will help bolster the ranks of those with Yahoo accounts, which could, in turn, provide a boost to Verizon Media’s digital ad business.

NS Tech and GlobalData are part of the same group