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Verizon-Yahoo! Incumbents Never Seem to Learn

Paul Budde

It is amazing that after the dozens of examples of failed business decisions made by telcos in relation to the digital economy, Verizon has clearly not learned any lessons and is willing to waste $4.8 billion in its purchase of Yahoo. This investment will be totally useless and will not provide any new revenue for the telco.

They seemed to be attracted by the people-tracking facility (surveillance marketing) that companies such as Yahoo use, and they aim this for their own purposes to attract new advertising revenues. I doubt it that it will do the job for them.

Funnily enough, for regulatory reasons, the incumbent telcos in America call themselves ISPs, but they are still simply the good old telco incumbents.

As incumbents, they have enormous problems in moving into more value-added services. They are engineering companies with enormous investments in engineering infrastructure, and their shareholders and management focus, as well as the makeup of their staff and culture, is around engineering.

For that reason we know of no incumbent telco that has been able to make a successful quantum leap into the digital media.

Rather than embracing these new developments, they first tried to stop them, then ignored them until they realised that these new developments were a real threat to their own businesses. In the meantime the Googles, Facebooks, Netflixes and Amazons of this world filled the gap and became what are now the digital media giants of the industry.

What also became clear was that these digital media developments would lead to true global companies and in a rather short period of less than a decade they became the dominant players in this market. While there is certainly room for niche market developments, the serious digital media business is of an international and not of a national nature and in all reality most telcos are typically national operators.

As we have seen in many aspect of the digital media world — including on the hardware side — it is nearly impossible for me-too companies to effectively challenge these digital incumbents. Adding Yahoo to Verizon will not make any significant difference to the business of the telco.

Only completely new 'quanta-leap developments' will eventually challenge the current digital behemoths and the Yahoo acquisition does not provide that quantum leap to Verizon. In that respect it will be more like their purchase of AOL — which also does very little for the company. AOL has become so insignificant that I had nearly forgotten about them until the name started to reappear in the context of the proposed Yahoo purchase. What a financial disaster that $164 billion merger was, reportedly the biggest merger fiasco in history!

In my view there is no way that Verizon can lift its business in the digital economy with the purchase of an already ailing digital media company. I wish I could have been more positive about this as, being an enthusiastic user of the Yahoo Flickr service; I have a vested interest in its success.

By Paul Budde, Managing Director of Paul Budde Communication – Paul is also a contributor of the Paul Budde Communication blog located hereVisit Page
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