Verizon Targets Millennial Viewers For Its Streaming Service With Vice Deal

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Verizon (NYSE:VZ) has signed a multi-year content deal with Vice Media, a youth oriented media brand, as it prepares for the launch of its mobile video service that is due later this year. Under the deal, Vice will provide its curated content from existing digital channels, in addition to creating exclusive new content for Verizon’s service. [1] Verizon’s interest in over-the-top (OTT) services such as mobile video and advertising has been growing, as its core wireless business contends with increasing saturation and high customer acquisition costs. The Vice deal should help to attract millennials and young viewers – who are a valuable target demographic for digital marketers – onto Verizon’s ambitious new video platform.

We have a price estimate of $56 for Verizon’s stock, which is nearly 20% ahead of the current market price.

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Verizon Mobile Ads And OTT Services As A Top Line Driver 

Verizon is looking at new avenues to make money from its existing 109 million-strong subscriber base. Mobile videos and advertising seem like a natural fit for the company, given its massive wireless subscriber base, access to customer data sets and its control over the so-called “wireless last mile.” Advertising dollars are quickly moving away from traditional media such as TV and newspapers, onto the web and mobile devices. Total digital ad spending is expected to increase 15% to $58.6 billion this year, according to research firm eMarketer, and mobile ad spending is expected to grow 50% this year to $28.7 billion.

Verizon has been busy bolstering its ad tech and video capabilities over the past year or so via acquisitions. In Q2, the company closed a $4.4 billion deal to buy AOL, bagging a large network of original video content and some promising programmatic advertising technology. The company’s new over-the-top mobile video offering is expected to be underpinned by Intel’s online TV platform that it company acquired last year. The OTT offering will bank on Verizon’s massive subscriber base and incentives such as sponsored data (advertisers subsidizing the cost of consumers’ video consumption) to get a leg up over its streaming video rivals.

Vice Should Serve Up Millennials, A Key Target Audience For Advertisers 

Younger viewers are a prime demographic for Verizon’s upcoming video service, since they are highly engaged with their mobile devices and are more likely to consume online video. Verizon has been licensing live and on-demand content for its video platform and Vice could deliver a relatively a sought after audience for the service. Vice’s counterculture themes and edgy reporting have made it popular with younger and mostly male audiences. The outlet had previously reported that roughly 80% of its viewers were between ages 15 and 34 – a prime demographic for marketers. In addition to Vice, the carrier has deals with content producers including AwesomenessTV (popular among teens) and many sports networks for live streaming of college games.

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Notes:
  1. Verizon Strikes Deal With Vice Media for New Video Service, WSJ, July 2015 []