Verizon has touted the merged AOL-Yahoo division — called Oath — as a powerful new digital-media player, providing Madison Avenue a large-scale alternative to the twin Goliaths of online advertising, Google and Facebook.
But Yahoo’s new disclosure that a massive user-account breach in 2013 affected 3 billion user accounts — triple its previous estimate — could hurt Oath’s standing among users and advertisers, according to one Wall Street analyst.
“While the breach took place prior to [Verizon’s] acquisition of Yahoo, we think it taints the image of its recently formed Oath business,” Angelo Zino, equity analyst at CFRA Research, wrote in a research note Wednesday.
The hack occurred four years ago, and Yahoo has said it has fixed the security holes that led to the data theft and that it also has informed affected users. In addition, Yahoo says the hack didn’t result in the theft of credit-card info or clear-text passwords.
But given that Yahoo says the 2013 data breach is three times as big as previously reported, affecting virtually all users at the time, “We believe these findings could also lead to additional legal and regulatory costs,” Zino added. The analyst maintains a “hold” rating on Verizon shares.
Verizon investors don’t seem too rattled by the massive Yahoo breach. Shares of the telco opened down slightly (0.4%) Wednesday, but hovered around the previous closing price of $49.85 per share in morning trading.
Oath CEO Tim Armstrong, who formerly led AOL, has said he expects the group to grow from $7 billion in annual revenue to between $10 billion and $20 billion by 2020. Currently, the combined AOL and Yahoo properties reach about 1.3 billion users monthly and serve 1 trillion monthly ad requests.