First, digital ad revenues are growing quickly. They are expected to grow 15% this year and another 11% the following year according to eMarketer. Though challenging the two elephants in the room – Google and Facebook – will be difficult, there’s enough room to carve out a profitable niche. AOL / Yahoo would own roughly 8.3% of digital spend in the US, which equates to $5.6 billion in revenue. Even if we account for the natural decline in Yahoo’s market share (especially from publishers …show more content…
There will be some natural attrition as redundant functions are let go, but more important will be retaining key Yahoo employees that don’t want to work at Verizon. Doing so will be a key task for Marni and Tim as they lay out a vision for the combined entity. In specific, their goal should be to at least stem the natural exodus of top talent that typically occurs post-exit.
Second, integrating Verizon’s formal management culture with Yahoo’s informal one could prove challenging. This is especially true since Verizon will now have to contend with integrating Yahoo and AOL while figuring out the combined entity’s strategy. This is a softer concern but a very real one (remember AOL and Patch?).
Lastly, the combined entity will require a war chest to acquire companies across the ad-tech stack to simply tread water against Google and Facebook. The problem is that between Verizon’s heavy post-Vodafone debt load and its ~$20 billion in annual network capex, finding additional cash to fund this war may prove difficult at times. This isn’t to say Verizon won’t fund M&A activity. It’s more a question of when there’s limited capital and only $1 left to invest, does it go to network or does it go to