Jeff Kagan: Verizon Oath Sued for Major Yahoo Data Breach

When we learned of the major Yahoo data breaches, I warned Verizon if they acquired the company, they would own any future problems that hornets’ nest would create. They decided that they wanted those users, no matter the risk. So, they acquired Yahoo. Now they are dealing with a growing storm of problems and things are only getting worse.

Last week a Federal Judge ordered Yahoo to face a lawsuit over these data breaches that impacted the personal information of all three billion users. Unfortunately, that means Verizon must now deal with this growing Yahoo problem.

Verizon (VZ) is a good company with good executives and good workers. They usually do things right. They also have on occasion stepped over the line, but when the marketplace made noise, they typically back down. Not this time.

Will Yahoo Data Breaches Tarnish Verizon Oath Brand?

The communications world has been changing for the last few decades. Today, Verizon is one of the largest communications companies offering telephone, wireless, Internet, VoIP, pay TV and more. They have seen growth over time and have generally kept their customers and investors happy.

However, the marketplace continues to rapidly change, and the solid ground they have been standing on is a bit shakier today based on the direction the company is heading.

The wireless, telecom, Internet and pay TV industries are all vibrant and growing spaces. But these are also fast changing spaces. These are changing industries with new technology, new competition and so much more.

Is Verizon Keeping Up with Changing Industry?

So, the question is simple. Is Verizon keeping up? We have seen other competitors making big changes and doing well. Let’s take a look.

AT&T (T) and AT&T Mobility acquired DirecTV and are rapidly changing the pay TV space with DirecTV NOW and started the wireless TV or mobile TV wave, among many other growth areas.

T-Mobile (TMUS) has been showing strong growth over the last several years, even though they are still just a wireless company. They are however, also moving into the world of pay TV later this year.

Sprint (S) has not changed as much. Not yet, but I am starting to hear some potentially exciting things. Hope so.

Comcast (CMCSA) Xfinity Mobile has entered the wireless space and is doing well. Their goal is to create a sticky bundle and hang onto their existing customers. It seems to be working. They are new to the wireless space and resell Verizon Wireless services.

Charter (CHTR) Spectrum and Altice (ATUS) are also cable television companies and should be entering the wireless space as well later this year. These three cable television giants will make an impact on the wireless industry.

We also see new players like Facebook (FB), Amazon (AMZN), Netflix (NFLX) and others enter the pay TV space as well. I expect to see others, large and small join in on the new marketplace. There are also quite a few smaller, IPTV pay TV firms that are wining business from the younger crowds.

Tomorrow vs. Yesterday in Wireless and Pay TV

Walk into any parents’ house and you will generally see cable television, telephone and other services they have been using for decades. Walk into any 20-something house and you will find a completely different setup.

They may not have a wireline phone. They use wireless. They may not have cable TV. They have high speed Internet from the telephone company or cable television company. They stream pay TV from a variety of new vendors over the Internet connection. They use their iPhone or Android as a remote control. Everything is very new and very different.

With all that said, the marketplace is rapidly growing and rapidly changing. New technologies, new competitors, new ideas, new ways to deliver communications services whether it be wireless, telephone, VoIP, IPTV, pay TV, wireless TV, Internet and so much more.

Verizon Heading in Different Direction

This is the world Verizon is having a difficult time adjusting to. If they could reinvent themselves today, I think they would be a wireless and high-speed Internet company. They would sell pay TV services and a variety of other services, using wireless and the Internet. No telephone.

Even in this crazy world, public companies still need to show strong growth or risk losing their investors, workers and customers. That’s why Verizon has been heading in this very different direction which is more difficult to understand.

They have been acquiring companies like AOL and Yahoo. Companies who have not been on the growth side of the growth wave for decades. Even so, they have customer bases that Verizon wanted to acquire. Now that they have acquired these companies and their customer bases, what comes next for Verizon?

What Verizon Oath Will Look Like Using AOL and Yahoo!

If we look ahead ten years, I see Verizon Wireless as a top player in the wireless space, same as today. However, growth will not come from this because every customer will already be a wireless customer. All the competitors will simply be competing for the same group.

Growth will come from other areas. In Verizon’s case, growth will come from the marketplace they want to create using AOL and Yahoo. They want to create an Amazon.com type space where they take a piece of the profit from a variety of areas.

Verizon calls this, Oath.

This sounds similar to what Walmart.com and Target.com are doing to compete with Amazon.com. Verizon will create a marketplace, where they will charge companies to sell on it. Like a shopping mall charges stores for a place to sell their items.

The big question today is this. How successful will this new business model be for Verizon? And there are no answers to this question. Verizon has never been a player in this space before. That means they will simply have to prove it over time. They have no experience, no history in this area.

That does not mean it won’t be successful. After all, there are other models to follow. However, they keep stumbling with this ongoing Yahoo! data breach problem.

They want to use their leadership position in one industry to serve as their stepping stone to another industry. I cannot tell you whether this will work for them. The idea can work. Now it’s just a matter of them successfully implementing it.

Until then, Verizon will continue to be pestered with this ongoing Yahoo data breach and that’s an itch they simply can’t scratch. An itch that will drag on for years to come. And I wouldn’t be surprised if there was even more bad news coming in the years ahead from this thorny acquisition. This is what has happened several times already.

Jeff Kagan is an Equities.com columnist. Kagan is a Wireless Analyst, Telecom Analyst, Industry Analyst, speaker and consultant. He follows wireless, wire line, telecom, Internet, cable TV, IPTV, Cloud, Mobile Pay, FinTech and communications technology. Email him at [email protected] His web site is www.jeffKAGAN.com. Follow him on Twitter @jeffkagan.