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Can Verizon Build a Strong Brand From the Bones of Yahoo and AOL?

Tim Armstrong has spent the last year under renovation. After AOL, the company Armstrong has run for the past nine years, merged with newly acquired corporate sister Yahoo in June, Armstrong was tasked with uniting the two. First he announced a new brand name—Oath—suggesting a move away from the stale early days of the internet that many people associate with AOL and Yahoo. Then he united his fiefdom physically, bringing disparate Yahoo properties like Tumblr and Yahoo News under one roof in the storied Wanamaker Building in New York’s Greenwich Village.

Oath now occupies four floors of the building. (Facebook’s New York headquarters takes up another four.) Boardrooms and offices have been ripped out and replaced with video studios, podcasting studios, newsrooms, tech labs, and snack bars. A life-size stuffed gorilla (a TechCrunch mascot) covered in Tumblr stickers stands guard in front of Armstrong’s corner meeting room.

I comment on the “WeWork vibes” I’m getting from the living-room-style conference rooms and faux fiddle leaf fig trees. I can imagine some employees wearing the ironic America Online T-shirts Urban Outfitters sold a while back for $45. That wasn’t what Oath was going for; Armstrong points out that the artwork comes from content created by Oath properties. Cutouts of Warren Buffett’s face, promoting Yahoo Finance’s recent live coverage of Berkshire Hathaway’s annual meeting, seem to be everywhere, the octogenarian’s likeness clashing with the whimsical startup accoutrements.

To outsiders, Oath’s mission is obvious: Take on Facebook and Google. If not that, it’s to entertain and hold the attention of mobile subscribers for parent company Verizon. If not that, it’s to combine the data of a telecom giant with the ad-tech prowess and reach of AOL and Yahoo. Maybe a little of all three.

But those options feel a bit fraught in today’s world. There’s increased skepticism about online ads. There’s heightened regulatory scrutiny of the personal data collected by digital advertising and telecom companies. And it’s not clear that any independent publisher—even one of Oath’s size, with over a billion visitors a month—can compete with the Facebook-Google duopoly. That may be why, lately, Armstrong has been selling a much simpler message, one that’s emblazoned in giant neon letters in the company’s lobby: “Build brands people love.”

“We can’t try to be 5 percent better than anyone” at delivering internet services and content, he says, because rival brands are so strong. “We have to be 15, 20, 30 percent better, and it’s a much higher bar for us.” Of course, if Oath’s brands come up short, Verizon’s data and deal-making heft may help.

On a recent spring morning, Armstrong describes how Oath will thrive by serving personalized content from its brands, including HuffPost, TechCrunch, Yahoo Sports and Yahoo Finance, directly to consumers through its apps, websites, and services. Where before, Oath properties relied heavily on social media for distribution, now they’re focused on going directly to consumers. As an example, Armstrong pointed to Verizon’s recent mega-deal to stream live NFL games through Oath’s media properties. “We wouldn’t have been able to do that deal on our own. That was with Verizon,” he says.

A deal with Samsung means Verizon Samsung Galaxy S9 and S9+ phones come preloaded with four Oath apps. Tech commentators bemoaned the “bloatware”; The Verge warned S9 owners to “prepare to start seeing a lot more Verizon and Oath content in [their] future.” Armstrong notes that, since the Samsung deal, time spent on Oath content and video is up an average of 30 percent.

Do these consumers know why they’re watching or reading Oath content? Do they feel they had a choice? Do they care? The idea that an internet service provider like Verizon might use our browsing histories to then serve us the right kind of Oath content may be unsettling to some consumers in the post-Cambridge Analytica, post-net-neutrality world. But Armstrong insists it is done in a “privacy-protected way” and that Verizon has been conservative in its use of data. “I think the telco industry uses data a lot less than the internet industry does,” he says. He points to Oath’s privacy dashboard, which allows consumers to opt out of data collection and personalized advertising with each of its brands. Also, “personalization” apparently is the wrong term. “Humanization” is the right term, he says. When a product is effective, it doesn’t feel invasive—it is appreciated, Armstrong says. Thus, “brands people love.”

And yet, digital audiences are not particularly loyal to media brands, often preferring to find their news and entertainment by scrolling social media. Many publishers, facing the same headwinds, have adopted subscription models (WIRED included).

To my surprise, Armstrong says Oath is doing the same. Rather than using a brand people love, it’s using AOL’s dialup internet business. That business, which still has 1.5 million subscribers, recently changed into a “multisurface subscription” business, Armstrong says. AOL users can now buy services like identity-theft protection, insurance, and computer-performance tools with their AOL accounts. Oath has signed up a million new subscribers to these products, he says, declining to specify a time frame. A big conversion point is AOL’s customer service options, which allow customers to call for any type of problem with their computer.

Armstrong would not elaborate on the size of the business, which is likely small in the scheme of Oath’s $1.9 billion in first-quarter revenue, but he said subscriptions are core to Oath’s future. “One of the things that we see is our ability to provide subscription services, both in the content business and then in the services business,” he says. He expects to bring subscription offerings to the broader set of Oath brands, he says, declining to elaborate on a timeline for such a move.

In addition to combining the two companies, which together employ 13,000 people, Armstrong has undone some of the work of former Yahoo CEO Marissa Mayer. Oath sold off the assets of Polyvore, a $230 million acquisition under Mayer, as well as Flickr, the photo-sharing site Mayer had relaunched with gusto. It has “refocused” on social network Tumblr, Mayer’s largest acquisition, whose founder left the company in November.

Oath has also revamped the business side. “There was a lot of focus on what I’ll call ‘empty calories’—deals that were done to basically push up the scale of revenue, but the company didn’t make money from them,” Armstrong says. Oath has moved the offerings of Yahoo’s ad system to higher-quality, higher-priced offerings, doubling the average price in a matter of months, he says. The company also simplified its ad offerings from thousands of possible combinations to around eight. “We’ve gone from a race to the bottom to a consumer-centered model, and that’s a really big change,” he says.


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