In less than three years after its launch with much fanfare in October 2015, Verizon Communications Inc. (VZ - Free Report) has decided to discontinue its mobile video app Go90 from August this year. The strategic decision is largely driven by a lackluster business response from the Millennials, who are the primary target segment for the app.
Go90 is a mobile first, social media platform that enables users to watch video content anytime, anywhere in the United States in a mobile device, regardless of the carrier involved. It features fresh content from top digital creators and offers a rich mix of sports, comedy, music, gaming, lifestyle, news and entertainment events.
The app was specifically designed for the Gen Y audience of cord-cutters and cord-nevers, who either cancelled their multichannel cable subscriptions in favor of media available through Internet or never used commercial cable for television service and solely relied on Internet sources for video feed.
Verizon expected to capitalize on this booming market through targeted video content and advertisements and reportedly invested nearly $200 million in its early stages. However, the company soon realized that Go90 was failing to gain traction despite wide promotional messages and engaging content. Consequently, Verizon laid off 155 employees who were working on the Go90 project in early 2017.
In the meantime, Verizon acquired AOL for $4.4 billion in 2015 and all the digital assets of Yahoo in 2016 for $4.8 billion and merged these to create a new company called Oath in late 2017. With the formation of Oath, the sustainability of Go90 was at stake and it was put under the broader Oath umbrella.
Oath is currently using brand advertising intelligence to help marketers build emotional connections with their customers through new 3D ad formats and first-in-market programmatic virtual reality (VR) ads. The programmatic VR enables advertisers to seamlessly extend existing display and video assets into fully immersive and consumer-first VR environments. On the other hand, 3D ads take brands to the next level by creating an interactive experience for customers, allowing them to explore objects and make informed decisions.
With such rich ad formats and appealing video content, Oath has emerged as the prime business division of Verizon in this market. Accordingly, the company has decided to pull the plug on Go90 on Jul 31 and return shows and content rights to its production partners.
In the past year, Verizon has recorded an average return of 13.9% while the industry declined 7.3%.
The stock currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the space include Comtech Telecommunications Corp. (CMTL - Free Report) and Motorola Solutions, Inc. (MSI - Free Report) , sporting a Zacks Rank #1 (Strong Buy), and Ubiquiti Networks, Inc. (UBNT - Free Report) , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Comtech Telecommunications has a long-term earnings growth expectation of 5%. It surpassed estimates in each of the trailing four quarters with an average positive earnings surprise of 123.7%.
Motorola has a long-term earnings growth expectation of 8%. It surpassed estimates in each of the trailing four quarters with an average positive earnings surprise of 12.1%.
Ubiquiti Networks has a long-term earnings growth expectation of 18.6%. It topped estimates thrice in the trailing four quarters with an average positive earnings surprise of 8.9%.
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