Verizon takes $4.6B media business write-down of Oath
After buying AOL and Yahoo for nearly $9 billion last year, Verizon recently announced that it will write down the goodwill value of its media business by $4.6 billion, a massive drop the company attributes to stiff competition in the digital ad market and a failure to realize benefits from the combination of the two legacy companies.
Not long after Verizon acquired Yahoo, the company unveiled Oath, a media and tech business under which Yahoo and AOL would be housed, among other brands, to challenge Silicon Valley’s dominant position in online advertising.
But according to a Securities and Exchange Commission filing, Verizon said the value of Oath’s goodwill — the intangible assets it purchased in the AOL and Yahoo acquisitions — has plummeted. Verizon had valued Oath’s goodwill at $4.8 billion, the filing said, but after the write-down it sits at just $200 million.
“Verizon’s Media business, branded Oath, has experienced increased competitive and market pressures throughout 2018 that have resulted in lower-thanexpected revenues and earnings,” Verizon said in the filing, adding that the merger of AOL and Yahoo under one company didn’t turn out as expected.
The company said it lowered its financial projections after completing a review of Oath’s business prospects over the next five years.
Joanna O’Connell, a research analyst at Forrester Research, said Oath had the makings of a valuable advertising platform, at least in theory, but failed to keep up with a competitive media landscape.
On paper, Oath possessed key ingredients for success: its own media assets, advertising technology and a huge base of users tied to crucial data, she said.
What’s less certain is why those components never cohered into something more, she explained, perhaps owing to a lack of buy-in from leadership, organizational weakness or the awkward marriage of AOL and Yahoo underneath Verizon.
The remarkable loss of value in Verizon’s marquee brands also underscores the challenges of competing in the market for online advertising.
Google and Facebook, the two dominant players, claim 58 percent of digital ad market share in the United States, according to the research firm eMarketer. But further down the rankings, ad companies are being outmaneuvered by another tech giant, Amazon.com.
The e-commerce company will double its digital ad revenue this year, according to eMarketer projections, overtaking Oath and earning the No. 3 position behind Google and Facebook, at 4.1 percent of market share.
Former AOL chief executive Tim Armstrong announced the reorganizing of Verizon’s media properties and the creation of Oath last spring.
“Billion+ Consumers, 20+ Brands, Unstoppable Team,” he said in a Twitter post, which was mocked at the time, with social media users ribbing Oath’s name and what they took as the strained rebranding of legacy Web companies past their prime.
But to Verizon, Oath was the culmination of its new advertising strategy.
Verizon bought AOL in part to take advantage of its ad technology, which could be put to work to sell increasingly personalized ads against Yahoo’s content.