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Verizon stitches together ‘Oath’ Frankenstein from dead web firms

Verizon has formed a new subsidiary called Oath that’ll house what’s left of its two recent digital advertising acquisitions: Yahoo and AOL. The formation of Oath, which comes as Verizon closes its $4.48 billion acquisition of Yahoo’s operating business, signals Verizon’s increasing ambition to marry its telecom and wireless businesses with its portfolio of digital advertising and publishing brands. But there’s little reason to think Verizon can successfully build out a digital media empire to compete with Google and Facebook from the corpses of two 90s-era online media companies.

Verizon has some 108 million wireless subscribers and 7 million wireline broadband subs, all of whom it can deliver targeted digital and advanced advertising to. Verizon is hoping to leverage the unique monthly users and subsequent data to bolster its own advertising across mobile devices. Verizon could also beef up its advanced advertising offerings delivered to its 4.7 million FiOS pay TV households – thanks to the FCC, which recently revised rules to allow ISPs to use browser data to sell ads.

And thanks to the digital real estate occupied by both Yahoo and AOL, Verizon will now be able to extend its advertising business to consumers across non-Verizon devices and platforms. HuffPost, Yahoo Sports, AOL.com, Makers, Tumblr, Build Studios, Yahoo Finance, Yahoo Mail and other sites are now all housed within Oath.

Traffic across Yahoo properties has been in steady decline over the years, despite efforts by CEO Marissa Mayer to turn the company around. Now that the acquisition is closed, Mayer has resigned. AOL, on the other hand, has maintained itself admirably during the online video revolution with Tim Armstrong at the helm, but that progress has been stifled since its acquisition by Verizon. AOL’s efforts were redirected towards supporting Verizon’s ill-fated mobile-first video app, Go90.

Verizon’s first order of business has been to consolidate AOL and Yahoo together, and lay off some 2,100 redundant employees, which it says will bring more cost savings and efficiencies to Oath. At this point, the only positive thing Oath has going for it is that Armstrong has been appointed CEO of the new company.

Armstrong outlined a strategy for the new digital media company at a recent event in Cannes. “We’re building the future of brands using powerful technology, trusted content and differentiated data,” he said. “We have dominating consumer brands in news, sports, finance, tech, and entertainment and lifestyle coupled with our market leading advertising technology platforms.”

That’s a rather rosy outlook for Oath. To make any headway in digital advertising, Verizon will have to come up against the twin giants in the space: Google and Facebook. Both Yahoo and AOL still reign supreme in display advertising, which has itself been on the decline as click through rates have dropped, pricing has dropped thanks to automated buying, and more ad dollars have moved to social networks and digital video. Google and Facebook completely dominate the online advertising space, particularly in video. It’ll be a tall order for Verizon to compete with either of them in the video space.

For one thing, Verizon’s scale isn’t anywhere near Google or Facebook. Those two can each easily reach 2 billion users every day, while estimates peg Verizon can now reach about 1.3 billion users daily. Armstrong says he can reach 2 billion consumers by 2020, and hopes that Oath will be generating revenues in the $10-$20 billion range by then, too. That, too, is terribly optimistic outlook for a new media company comprised of two older and in decline media companies.

While AOL and Yahoo both dabbled in scripted original series, most of the traffic stems from news-related content. Which brings us to the interesting bits of Armstrong’s plan for Oath: he wants to make the company primarily a news content digital media company.

Speaking at Cannes, HuffPost CEO Jared Grusd said news will form the nucleus of Oath. “News is the thing that forms daily habits, so it really serves as the anchor tenant of how we think about introducing consumers into the flywheel of the media organization that we’re building. News is actually driving the behavior, both on the consumer tech companies and on the media companies. We’re sitting on the terrific opportunity to become the most relevant, leading content provider of news in the world.”

So Verizon’s plan seems to be that as Facebook grapples with the rise of fake news, and Google grapples with questionable content on its platforms, Oath can become a brand-safe environment for advertising across a number of verticals, spanning news, sports, lifestyle and entertainment and, of course, online video.

Interestingly – or perhaps, ominously – this isn’t too far from what Mayer tried to do when she first stepped in as CEO of Yahoo. Mayer brought in a slew of award winning journalists, including Katie Couric, to head its news vertical, but her efforts didn’t gain much traction among consumers.

Can Armstrong do any better with Oath? Unlikely but not impossible. Oath will face a huge uphill battle to see Yahoo return to growth. Its famed email service suffered not one but two massive security breaches last year, and Yahoo’s prize acquisition, Tumblr, has lost significant value under its ownership. And while Armstrong said he considers Yahoo a “very, very powerful asset for the future,” he’s already begun gutting its top performing news sites, like Yahoo Finance and Yahoo Sports. Key journalists from both were part of the 2,100 lay-offs. Armstrong has gutted some of AOL’s news assets, too. A handful of AOL’s top journalists, including David Wood, who won HuffPost a Pulitzer Prize in 2012, were recently handed pink slips.

Both the AOL and Yahoo acquisitions were all about ad tech, not content. Oath could become a powerhouse for Verizon’s digital advertising business, but it won’t operate at the scale of Google or Facebook, who have sucked up all the oxygen and ad dollars out of the space.

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