August 14, 2019

Breakingviews: Verizon’s best media strategy is not having any

by Breakingviews.

Verizon Communications’ best media strategy is probably not to have any. The $230 billion U.S. telecommunications group’s bets on internet content and advertising never made sense. The sad trajectory of high profile, low revenue Tumblr illustrates the divide. The site’s sale carries an embarrassing price tag. It’s another wake up call for Verizon to pull the plug on AOL and Yahoo.

Tumblr was once worth $1.1 billion – or at least that’s what Yahoo paid for the site in 2013. The wannabe social network was a bewildering mix of material, popular among those interested in design, esoteric memes and artistic pornography. Yet the site always had trouble making money, and rapid user growth eventually turned to decline under its new owner. Yahoo wrote down about two-thirds of its purchase price in 2016, and Verizon is offloading it for as little as $3 million, according to Axios.

The company’s overall ambitions in media have followed a similar arc. It paid about $9 billion in total to buy AOL in 2015 and Yahoo’s core operations in 2017. The company hoped to become the RC Cola of internet advertising, a challenger finding a place behind giants Google, owned by Alphabet, and Facebook. In 2017, unit boss Tim Armstrong said Verizon’s newly-branded Oath media division would have $10 billion to $20 billion of annual revenue in 2020.

It didn’t work. Regulatory constraints on how telecom companies handle consumer information hindered Verizon’s efforts to compete, and it never figured out how to reinvigorate its internet invalids. Two years later, Armstrong doesn’t run the division, it is no longer called Oath, and revenue fell to just $1.8 billion in the second quarter. That’s a pittance for Verizon. The company would be better off dumping what’s left of media and focusing on its lucrative day job.

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