Written by: Jeff Kagan
The last several years of activity at Verizon VZ[NYE] – $56.39 0.69 (1.21%) have left me perplexed and confused and apparently, I was not alone. Why would a wireless leader on the growth side of the growth wave acquire AOL and Yahoo, who are two companies on the falling side of their growth curve? This goes against everything that makes sense to me.
I talk about the growth wave regularly. There are three sides to every growth curve, the growing side, the cresting top and the falling side. Every company and every product are somewhere on the growth wave. The only winning side is the growth side.
Verizon Must Stay on Growth Side of Growth Wave
Verizon is still on the growing side of the growth wave, although their growth seems to be slowing considerably. This is concerning. It’s not too late, but something needs to change and quickly or they risk moving to the falling side of the growth wave.
With a private company, this is not an issue. However, with a public company that risks losing investors who are only interested in making more money every year.
I think that’s why they want to expand into other areas, which is why they acquired AOL and Yahoo to begin with.
They wanted to create a new competitor called Oath, which in theory would be like a big online shopping mall with lots of online stores where customers can buy things. They would be the landlord like Amazon.com AMZN[NGS] – $1,540.95 50.96 (3.20%) or Walmart.com WMT[NYE] – $91.37 0.48 (0.52%) and they could compete in the digital advertising world against Facebook FB[NGS] – $143.01 1.05 (0.73%) and Google GOOGL[NGS] – $1,040.91 10.80 (1.03%).
If they could wave a magic wand over the marketplace and make this dream come true, there could be growth. However, and this is a big however, Verizon is nowhere close to Amazon, Walmart, Facebook or Google in what it takes to not only survive, but to lead this new way of thinking and of doing business in this digital world.
This is an entirely different business. Verizon is a leader of yesterday trying to success in the world of tomorrow. The challenge is understandable. However, that path is not.
Verizon Brand Is Centered Around Wireless and Telecom, Not Shopping
First, the Verizon brand has a strong meaning. However, it is not connected to shopping. Customers who are shopping online do not think of Verizon, they think of Amazon, Walmart or others. When they are online using Facebook, Google or other online and social sites, they are used to getting ads. Not from Verizon.
So, what does the Verizon brand have to say about advertising, marketing and online shopping? Not much. Yet, this is the direction they have been heading in over the last several years.
Verizon Oath Was to Compete with Amazon, Walmart, Facebook, Google
The Verizon brand is strong in wireless and telecom. They should have expanded in this territory. However, they have not done much to expand in this next natural area.
There are plenty of areas they can expand into and show strong growth. Areas like pay TV and with the coming of 5G, wireless pay TV. FiOS TV was a good attempt several years ago, but we have seen very little in the last few years.
AT&T T[NYE] – $29.84 0.38 (1.26%) seems to be heading in the right direction. They moved into pay TV in the last several years with DirecTV NOW. They are now the largest, national provider of pay TV. They also just acquired Time Warner and renamed it WarnerMedia. I think this will be another home run for the company in coming years as they transform themselves.
AT&T, Comcast, Xfinity Mobile Are Expanding Within Their Core Areas
This is similar to what Comcast CMCSA[NGS] – $36.42 0.085 (0.23%) Xfinity is doing. They acquired NBC Universal several years ago and their recent entry into wireless with Xfinity Mobile is another natural step for them.
These are the kind of expansion plans that make perfect sense to investors. They continue to lead in their core business, plus they are expanding into other areas which are close to the core and make perfect sense.
The change wave regularly sweeps across every industry. Every industry always changes. That’s the way things have always been. Progress, new ideas, new thinking, new technology, new competition continually change everything.
In this world, it’s impossible for a successful company to stay successful unless it changes. Unless it stays with the moving growth wave.
Stay on the Growth Side of the Change Wave
Think about the growth wave or change wave like the waves at the beach. They are always moving. If you are standing in the water, you have a choice. You can either stand still and let the waves pass you by… or you can ride the wave and stick with it.
In business, every company needs to stay with and ride the change wave. Standing still will only lead to it moving ahead without you. That will only lead to a slowdown for the business that misses it. So, every business needs to stay on the growth side of the growth wave.
We regularly see successes and failures in every industry. Some companies successfully continue to ride the growth wave. Some don’t.
In wireless, telecom and pay TV, todays leaders are AT&T and Comcast. While Verizon has a strong wireless service, they have not been doing a good job of staying with the growth wave. They have tried so many different ideas, but they just can’t seem to catch a break. Not yet anyway.
I am hopeful with new CEO Hans Vestberg at the helm, Verizon will start to turn the corner and show growth going forward. Remember, every company must stay on the growth side. There is no other option.
We won’t know for a while whether Vestberg will be successful or not. It’s a big hill to climb and it looks like he is fully prepared for the journey. Let’s hope so. I’ll be watching.
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