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U.S. telecom behemoth Verizon Communications Inc. (VZ - Analyst Report) has been systematically diversifying its business, which is also helping it expand its mobile video segment.  According to a recent report by technology news website Recode, Verizon may be in talks to purchase the new video-online subscription service, Vessel. However, nothing concrete about the deal has been disclosed yet.

Mobile Video Start-up: Vessel

Launched in 2015, Vessel is a mobile-video start-up which allows content creators earn more money than one can on YouTube. The platform mainly aims to offer free videos for $2.99 a month, helping viewers access the latest content 3 days ahead of their market release on Alphabet Inc.'s (GOOGL - Analyst Report) Youtube or any other platform. However, the company failed to gain much from these initiatives and thus had turned down many of the content deals. Reports state that Vessel has already raised more than $134 million till date from its investors - Benchmark, Greylock Partners, Institutional Venture Partners and (AMZN - Analyst Report) . Hence, the company is focused on creating a ‘Snapchat-like’ product which will allow users to add image filters and other features to content and another group-video service – ‘Hubcap’. These new launches demonstrate a shift from its initial business plans.

Verizon’s Digital Media Business

Verizon is striving to garner a leading position in the wireless market, as evident from its substantial investments in the video business.

In Jul 2016, Verizon purchased Yahoo Inc.’s (YHOO - Analyst Report) core assets for a little over $4.8 billion in an attempt to survive as a standalone company amid stiff competition from U.S. telecom behemoth, AT&T Inc. (T - Analyst Report) . Under the terms of the deal, Verizon will gain control over Yahoo's core assets including its search products, digital content brands, advertising as well as analytics assets. The acquisition will help Verizon become the third major player in the $187 billion digital advertising space, well behind market leaders like Google and Facebook Inc. (FB - Analyst Report) .

Verizon also launched Go90 – a mobile app that features video content from traditional TV networks like Comedy Central as well as digital natives like AwesomenessTV, targeting the younger generation. To derive maximum benefits from its mobile video platform, the company also took over AOL Inc. that provides advertising technology, enabling automated buying and selling of ads online.

Bottom Line

Verizon is currently focusing on online content delivery, mobile video and online advertising for growth. These businesses have the potential to generate significant revenues, especially when the company’s legacy telecom business is facing serious pricing competition. According to eMarketer, the global mobile ad market value is expected to reach $133.7 billion by 2017.

If the deal works out, then a platform like Vessel should prove to be an add-on to Verizon’s media assets.

Verizon currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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