What is Verizon's (NYSE: VZ) go90, really? One analyst is arguing that the key reason the carrier launched the mobile-first over-the-top video service is not to upend current online video business models, but a much simpler and purportedly more lucrative reason: to collect data on users that it can sell to advertisers.
The ad-supported go90 service speaks to a deeper initiative to build a new revenue source, according to MoffettNathanson analyst Craig Moffett in a brief released to subscribers immediately after Verizon's third-quarter earnings report. "In Go90, they are simply trying to create inventory … that they can then sell to advertisers," Moffett said.
Google (NASDAQ: GOOG), of course, built much of its empire on the search data it collects from users, but Verizon hasn't yet capitalized on its subscribers' data. Much of that is due to privacy requirements, of course -- but opting in to the go90 service could mean giving Verizon permission to use go90 users' data in more creative ways.
For example, smartphones' capability to track their users' whereabouts provides additional depth on individuals' behavior that Verizon can sell to advertisers. "Imagine a world where Verizon can deliver to an advertiser a list of all users who have actually set foot inside an auto dealership in the last 24 hours, based not on whether they have self-identified via Internet search but instead based on where they have actually been."
Verizon's focus, Moffett argues, is much less on changing online video business models, and more on changing advertising models.
The carrier's strategy is needed in order to break it out of the wireless industry's shaky position as it and competitors like AT&T juggle new business models, such as direct handset sales (versus the older subsidy model) and compete for subscribers in a saturated market.
"Go90 may hold the key" to longer-term profits, Moffett said, with information as the OTT service's most valuable asset.
MoffettNathanson rated Verizon a "buy" with a target price of $54.
- see the report (sub. req., PDF)
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