Verizon went with free, cheaply produced content that’s primarily funded through digital ads. AT&T bought Time Warner’s high-end, premium content, the kind that’s primarily monetized through movie-ticket sales, cable subscriptions, and, the hope is, an on-demand streaming app set to launch next year. and the government blocking any horizontal mergers due to antitrust issues, these companies have turned toward vertical expansion in their hopes for continued growth.įor both Verizon and AT&T, neither company wanted to continue serving as just the dumb pipes through which content flowed they wanted to own the content going through those pipes, with the idea that, because they held such granular data on how customers used their networks, they’d be much better at monetizing that content.īut they approached their content acquisitions from two separate directions. With the telecom market mostly saturated in the U.S. In 2009, Comcast initiated a $30 billion merger with NBC Universal, and Verizon’s chief competitor, AT&T, bought Time Warner this year for $85 billion. The first thing to remember is that it’s become common for ISPs and telecom giants to purchase content companies. Marissa Mayer’s attempts to turn around the struggling Yahoo were largely regarded as a failure, and while AOL seemed to be faring better under Armstrong, long gone were the days when tens of millions of people would pay $30 a month to the company for dial-up internet.īut were these acquisitions such an obvious mistake from the beginning? If you look back at the media coverage that took place immediately after they were announced, you’ll find that many tech pundits were onboard with Verizon’s reasoning. After all, these companies weren’t exactly thriving when the telecom giant bought them. Many felt that this outcome had been inevitable. “Hope someone’s keeping count of how much dumb money has been burned on internet-media acquisitions in this cycle,” tweeted John Cassidy, The New Yorker’s economics writer. Recode’s Peter Kafka wrote that it was “easy to predict” that Oath would ultimately fail. Verizon claimed that Oath “has experienced increased competitive and market pressures throughout 2018 that have resulted in lower than expected revenues and earnings.” These are pressures it expects to continue. In a filing to the SEC this week, Verizon sought a $4.6 billion write-down for the company, effectively cutting its valuation in half. As recently as this summer, Armstrong was fielding interviews with Wired in which he touted the company’s new motto: “Build brands people love.”Īs it turned out, people didn’t love Oath. Helming this ship was AOL CEO Tim Armstrong, and he now oversaw a vast array of properties that included HuffPost, TechCrunch, Engadget, Yahoo Sports, Yahoo Finance, AOL.com, and the social blogging platform Tumblr, which Yahoo acquired for $1.1 billion in 2013. Shortly after the Yahoo acquisition, Verizon merged the two into a single brand it called Oath. The telecom giant acquired the two companies in 20, respectively, paying a combined $9 billion for the privilege. In the earnings call, CEO Marissa Mayer had told investors the company is carefully evaluating bids for sale.Many within the media industry weren’t exactly surprised when Verizon announced this week that it was seeking a massive write-down on AOL and Yahoo. This latest mark-down for Tumblr came after an earlier write-down of $230 million. In 2013, Yahoo had paid $1.1 billion for the blogging service. Yahoo also reported it was writing down $482 million in charges related to the declining value of Tumblr. Yahoo’s results for April-June quarter, which were announced on July 18 showed that the company’s revenue fell 19 percent from 2015, while its loss widened to $440 million. Yahoo also acquired a news aggregation app called Summly for $30 million, which didn’t bear much results for the company in the news space. When Mayer had first joined Yahoo, she had put the emphasis on mobile as a strategy for the company and introduced new measures like ‘no work from home policy.’ Under Mayer, Yahoo bought over Tumblr the popular blogging platform for $1 billion, an acquisition it later indicated had not been profitable.
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