Will Yahoo View Improve Topline For Verizon’s Yahoo Properties In the Future?

YHOO: Yahoo! logo

Yahoo (NASDAQ:YHOO) has recently launched its new video streaming platform called Yahoo View in partnership with Hulu. [1] The on-demand video service streams recent episodes of television series from the ABC, NBC, and Fox networks in the United States. While this website will be the property of Verizon, once the statutory approvals for the acquisitions of Yahoo’s business are met, we think that through this launch the company is aiming to capture a bigger share of the online video advertising market, which is slated to reach $28.1 billion in the U.S. by 2020. [2] In the first part of this article, we will discuss trends in online videos industry. In the second part, we will explore how Yahoo Views can bolster Yahoo’s display ads dollars.

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Factors Driving Online Video Content

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On the supply side, premium original video content is growing because many traditional media companies are boosting their online presence to capture a shift of viewers moving online for streaming digital content.

On the demand side, online video content is becoming increasingly popular due to broader Internet access and the advent of smart connected devices (which include tablets, smart phones and notebook PCs). Many users, especially in developing countries, are accessing the Internet for the first time through these devices. According to Ooyala estimates, mobile devices accounted for more than 48% of online video starts in Q1 2016. [3] We believe that the penetration of mobile devices will lead to huge growth in online video consumption in the future.

As online video content empowers users to dictate what, when, and over which medium to watch the content, viewers are spending more time viewing videos online rather than on traditional TV. We expect these trends will continue to drive demand and supply for online video content in the future.

Trends Supporting Online Video Ads Spending

The change in consumer behavior is prompting the migration of TV ad budgets to online spending. While TV ad spending is expected to exceed $77 billion by 2020, video online ad spending is expected to exceed $16.69 billion by 2020, according to eMarketer. [4] Additionally, digital video ad spend is increasing at a faster pace and much of this growth is coming from mobile devices. According to eMarketer, mobile ads share of online video ad spending is expected to increase from 17.3% of the total in 2015 to nearly 32.9% by 2020.

eMarketer expects digital video spending to reach over one-fifth of what is spent on television ads by 2020. According to Interactive Advertising Bureau, 72% of video ads buyers said that they would likely move TV dollars to digital video in the coming year. [5]

Yahoo View Initiatives To Boost Display Ads

Yahoo’s display ads revenues have been declining in the last few years. According to our estimates, display ads contribute approximately 4.8% to Yahoo’s value. Net revenues from this division were around $1.66 billion in 2015, and we believe that it will improve marginally to reach around $1.78 billion by the end of our forecast period.

We believe that Yahoo is systematically targeting the TV ad dollars with the launch of Live services. We are of the view that the company can charge CPM comparable to TV CPM for ads displayed on premium videos that can be streamed on connected devices.

Additionally, as viewing videos from mobile devices (especially in offline mode) gains traction across the world, we anticipate that the unique visitor count for Yahoo will increase. The number of unique visitors is vital for Yahoo’s display ad revenues as more people visiting the website generally translate into more pages viewed across Yahoo’s websites. We currently project the pageviews per user to decrease from 157.7 to 155.2 per month by the end of our forecast period. However, if the pageview per user were to reach 200 per month due to the adoption of these services, this would increase our price estimate by an additional 5% and Yahoo’s display ads revenue to $2.3 billion by the end of our forecast period.

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1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Yahoo
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  1. Yahoo launches a TV-watching site, Yahoo View, in partnership with Hulu, August 8 2016, www.techcrunch.com []
  2. Digital Video Advertising Continues to Expand, March 21 2016, www.emarketer.com []
  3. Ooyala Q1 Video Index: SVOD vs. AVOD engagement; the QoE impact, June 16 2016, www.Ooyala.com []
  4. Digital Ad Spending to Surpass TV Next Year, March 8 2016, www.emarketer.com []
  5. 2016 IAB Video Ad Spend Study, April 2016, www.emarketer.com []