Lowenstein’s View—Verizon-AOL-Yahoo: now what?

Verizon's Oath will combine roughly 50 media and technology brands. Image: Verizon

As of last week, Verizon owns Yahoo. Combined with AOL, OnCue, Complex Media, and EdgeCast, Verizon has spent north of $10 billion to amass a fairly formidable combination of assets in the media/content/ad tech spaces. Now what?

So far, three big things have happened, related to the Yahoo close. Verizon announced that the name of the combined AOL and Yahoo will be called “Oath”. Fortunately, the brands will not go away, because Oath is almost as bad as “Tronc” (the combined assets of the Tribune Publishing Co.). In late April, AOL head Tim Armstrong announced the leadership team of the combined company, a collection of some of the best and brightest from AOL, Yahoo, and Verizon. And last week, media reported that Verizon will lay off 1,000 employees or more (some 15-20% of the combined companies’ workforce), perhaps not the best news to be reported a day after the Yahoo deal closed.

The reasons for the deal, the collection of assets, and so on have been well reported on and dissected for the better part of a year. Instead, time to play the role of consultant and provide some advice for Messrs. McAdam & Armstrong, and Ms. Walden. Here are a few recommendations.

  1. Transparency Could Be An Ally. Verizon walks into the ad tech space with some skepticism with regard to its practices. We all know about the Yahoo data breach last fall. And last year, Verizon was fined by the FCC for its use of "supercookies." Plus, there was Congress’ recent pullback of Internet Privacy rules, which were to go into effect in late 2017.
    As Verizon evolves its ad targeting strategy, the company could, very publicly, take some steps to do the right thing. It could be very transparent with customers, saying “here is the data we have, and here’s how we plan to use it”, educating consumers on the potential benefits of ad targeting, and creating an easy to access, user-friendly dashboard, providing various opt-in and opt-out options.
  2. Offer Streaming Service for Free. Verizon is reportedly planning a streaming service to launch later this year. This is already a crowded field. How could Verizon do something disruptive? Well, with the company’s array of data and ad targeting capability, what about offering a free or significantly reduced price package of content, in return for the ability to use those customers’ data for ad targeting, done properly? Remember, the original TV model was exclusively ad-based. This could be the 2017 version of that.
    Again, Verizon would have to tread very carefully here. If the company is highly transparent in its dealings, it could build some consumer trust in this area and create the opportunity for a higher order of relevant ad delivery and ability to track and report effectiveness.
  3. Create More Effective Combinations of Content. Verizon has a lot of content across many brands and partnerships: think of AOL (TechCrunch, Gadget, Huffpro); Yahoo (strength in sports, finance, lifestyles); unique content being produced for Go90; and relationships with sports properties such as the NFL. A key opportunity is to leverage that into some attractive content combinations and packages. This could be in the form of better curation, recommendations, and search & discovery. For example, Verizon can take a page out of Comcast (Xfinity)’s X1 platform, and provide relevant Yahoo sports and fantasy content alongside certain broadcasts.
  4. Own Some Segments. Google and Facebook own more than half of the digital advertising market. It is clearly an uphill battle for Verizon to capture some significant share of this. Rather than a broad-based assault, why not ‘own’ certain segments that are areas of strength for Verizon’s content assets? For example, Verizon has great content in politics, lifestyle, sports, and tech. Verizon should explore how to have its share over-index the competition in select segments.
  5. Do Some Experimenting. Verizon is making a big play here in acquiring ad-tech capabilities to leverage its other assets. Why not try a few things here, in an isolated way? Here’s an idea: Verizon paid $20 million for the rights to stream an NFL game this fall. This could be an platform for experimentation, such as bundling in Yahoo sports/fantasy assets to create a more integrated, immersive experience, or partnering with some folks to do something in the VR area. This could be from the standpoint of additional content, or unique forms of marketing and advertising.
  6. Build or Buy Some AI and Big Data Assets. Verizon has a lot of content assets across multiple, and somewhat disparate properties, plus customers across mobile, TV, and the web. How will the company develop the right products and packages? Can it create a more effective, and well tolerated, ad-targeting model? Can the search and discovery of content be improved? One question is whether Verizon has the adequate collection of big data and AI talent/assets, given what Amazon, Google, Facebook, and Apple are working on these days. Hopefully this is something that Armstrong and his team are seriously thinking about.  
  7. Invest in Some of the Legacy Properties. Some of AOL and Yahoo’s legacy, and still popular, products are feeling a little stale and under-invested in. Mail, Flickr, and even Yahoo Finance are some examples here. How can Verizon’s collection of assets be used to give these products a refresh?
    The other piece of this is more marketing dollars. Perhaps Oath can siphon some of the Verizon Wireless’ gargantuan marketing budget.

This whole exercise is going to make a great HBS case study someday. Talk about quad play—you’ve got the challenge of: buying businesses to find major new revenue opportunities, since revenue growth in the  core product (wireless) has slowed; classic issues of integrating multiple businesses, products, teams, and cultures; reviving legacy brands; and taking on some of the most powerful and profitable companies in history. Should be interesting.

Mark Lowenstein, a leading industry analyst, consultant, and commentator, is Managing Director of Mobile Ecosystem.  Click here to subscribe to his free Lens on Wireless monthly newsletter, or follow him on Twitter at @marklowenstein.