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Verizon is tapping into AR ads to help diversify its revenue streams (VZ)

Verizon is tapping into AR ads to help diversify its revenue streams (VZ)

Verizon's media and online business Verizon Media announced it will add augmented reality (AR) features to its native Moments advertising format for businesses. Advertisers will be able to make AR ads on Moments that allow consumers to interact with products in a 3D environment overlaid on the real world via a phone's camera and screen.

Business Insider Intelligence

The Moments AR integration follows Verizon's initial debut of AR on Yahoo Mail, which the company says led to unprecedented user engagement. Advertising makes up a small and shrinking part of the telecom's revenue: Verizon Media's revenue fell almost 3% year-over-year (YoY) to $1.8 billion in Q2 2019. To reverse this trend, the company is looking to reinforce the growing segments of the business with AR — Verizon said gains in its native and mobile ads during Q2 2019 were offset by declines in desktop advertising.

Verizon can take advantage of growing consumer familiarity with AR to drive further revenue for its advertising business. Almost 69 million US consumers (over 20% of the US population) are expected to engage with AR at least once per month in 2019, up from just under 60 million in 2018, according to eMarketer.

Verizon will be able to cash in on increasing consumer uptake of AR by enabling advertisers to better reach its portfolio of media platforms like Yahoo News and TechCrunch with a range of ad formats, including AR — AR ads are expected to generate almost $2.5 billion by 2022, up from just $418 million in 2018.

US telecoms are faced with a shrinking pool of mobile subscribers as the market creeps toward saturation, pushing them to explore new sources of revenue. Smartphone penetration in the US hit 85% in 2018, up from 82% in 2017 and 77% in 2016. Telecoms are responding accordingly by diversifying their businesses beyond mobile connectivity.

Last year, AT&T launched an advertising company and moved further into the media business with the acquisition of Time Warner. Meanwhile, T-Mobile is moving into the home broadband and mobile banking markets with the announcement of a home internet pilot and the launch of T-Mobile Money.

Integrating new tech or offering new services like AR to build out existing business segments is a cost-efficient tactic to increase noncore revenue streams and should be pursued by other telecoms — especially those that offer or plan to offer 5G services, as the standard's low latency and fast download speeds will enable them to provide high-quality immersive experiences.