‘I couldn’t articulate the strategy’: Insiders say Verizon’s marriage of Yahoo and AOL was doomed from the start

In 2017 Verizon seemingly had all of the components necessary to mount a legitimate challenge to the Facebook-Google duopoly.

To the technology and media assets gained through its 2015 AOL acquisition and 2017 Yahoo acquisition — an amalgam now called Oath — Verizon planned to apply its rich subscriber data for powerful ad targeting. Tim Armstrong, the CEO of Verizon’s media and advertising business, Oath, spoke openly about challenging the duopoly.

More than a year later, Oath’s placement in the broader ad industry seems more uncertain than ever. Armstrong is in talks to leave the company, according to sources close to the matter. And Verizon plans to integrate parts of Oath’s business into the larger company.

“The goal was to challenge Google and Facebook,” a former senior Oath employee who worked in communications, told Business Insider. “No one in the industry thinks they are a competitor.”

In fact, the integration between AOL and Yahoo has never been on solid footing, according to former senior AOL employees who spoke with Business Insider.

Dysfunction at Oath, according to these employees, can be traced to three main problems at the company: Yahoo’s culture, high employee turnover, and an inconsistent strategy at Oath.

Culture wars

Traders on the floor of the New York Stock Exchange on May 12, 2015, the day Verizon bought AOL for about $4.4 billion.
AP Photo/Richard Drew

No merger is seamless. There’s an expectation that there will be some discomfort when joining two — and eventually three — distinct companies together.

Still, cultural differences caught the attention of employees at AOL during the early days after Verizon acquired the web pioneer in 2015. An anecdote about then AOL CEO Tim Armstrong’s first day on the job post merger encapsulates how different the two companies seemed.

When Armstrong showed up at Verizon’s office on the first day after the merger, according to an employee who was there at the time, he was friendly. Verizon, on the other hand, was militant, and security came out because they didn’t know who he was.

In these early days, AOL’s close-knit, familial culture frayed as Verizon’s staid, telco environment took over, former AOL insiders said.

Still, the inherent cultural differences between AOL and Verizon weren’t insurmountable. “Verizon made an effort to value our business,” a former senior Oath executive said.

It was the Yahoo acquisition in 2017 that profoundly influenced the culture at Oath and impeded integration between the AOL and Yahoo factions, according to the employees.

Yahoo and AOL were just not a great mix

AOL felt like a family, congenial and working toward a common good, according to employees. Working at Oath with Yahoo felt mechanical and cutthroat.

And differences in ethos between the two companies shone through in their divergent business approaches. The practice of scanning email Yahoo.com and AOL.com email addresses, for example, was brought over by and developed by Yahoo, according to an employee. “That was laid on Tim Armstrong, not something he developed.”

These cultural challenges, though, may be attributed to the different acquisition stories of the two companies.

The 2015 Verizon-AOL acquisition took place over the course of a year, and executives at both companies had plenty of time for planning and strategizing. Verizon bought Yahoo within 90 days on an auction with no advance strategy sessions, according to a source with knowledge of the situation.

In essence, the strategy has unfolded in real time over the course of the past year.

Leadership turnover

Oath

The leadership team at Oath also has never seemed to be on solid footing. Of the seven members of the leadership team, three began their roles in 2018.

Vanessa Wittman, Oath’s chief financial officer, joined Oath in January, Guru Gowrappan, president and chief operating officer, joined the company from Alibaba in April, and Natalie Ravitz, the chief communication officer, was hired from the NFL in June.

Now, Oath’s executive leadership team is again in flux as a result of the decision to integrate parts of Oath’s business into Verizon and the expected departure of CEO Tim Armstrong.

Chief people officer and longtime Armstrong confidante Bob Toohey departed the company last week, and chief financial officer Vanessa Wittman and chief communications officer Ravitz are planning to leave the company in the coming weeks, according to people close to the matter.

Beside the C-suite, Oath has been a revolving door of other senior executives, and many positions have not been replaced.

Simon Khalaf, who was head of Oath’s media brands, ended that role in April, and his position is now gone. The position of chief marketing officer, most recently held by Allie Kline, was not replaced. And the role of chief revenue officer, held by John Devine until June, was also axed. Below the senior level many employees have been cut in the past year.

AOL got decimated, and this turnover bred dysfunction, according to employees.

‘No one wants to take creative risks’

And fear of constant layoffs affected morale at the company. Following the acquisition thousands of employees were cut across AOL and Yahoo.

“It’s a harsh environment to work in,” the former communications employee said. “No one wants to take creative risks. Any sort of mistake you’d be like ‘I’ll be on the next list for layoffs.'”

Inconsistent strategy at Oath also posed a challenge to employees there. Messaging changed from week to week and stymied the integration, according to the insides.

“At Oath, I couldn’t articulate the strategy,” according to the former communications employee, who said that at their new company they can clearly state their business’s priorities.

It’s criticism that’s recognized by the broader industry as well. “The vision is muddied, the strategy is unclear,” a top ad buyer told Business Insider in July. “They are a jack-of-all-trades, but it’s hard to discern what they are masters of, if anything.”

Another offsite, another integration, another strategy

Yahoo’s Sunnyvale, California campus
AP Photo/Marcio Jose Sanchez

Senior leadership has begun to work towards creating a consistent strategy.

In August, news of another integration was communicated to corporate staff. At a leadership retreat with 200 corporate staff on Yahoo’s Sunnyvale, California campus, employees were told that corporate functions — including finance, HR, communications, legal, and IT — would move to Verizon, while product, engineers, and media will stay under Oath, according to sources familiar with the matter.

At this retreat, leadership spent two days laying out the new strategy around their six key areas — sports, news, finance, entertainment, homepage, and email. And next week, Oath will launch the new ad platforms it has been working on for the past year, according to a source with knowledge on the matter.

Former Verizon CEO Lowell McAdam spent his last day on the job at the retreat. McAdam had been CEO of Verizon since 2011, and oversaw both AOL and Yahoo acquisitions. Verizon’s new CEO Hans Vestberg hasn’t said much about the company’s Oath strategy since stepping into his role in August.

And Verizon won’t comment on recent reports about the integration. “We don’t comment on speculation and have no announcements to make,” Verizon said in a statement to Business Insider, leaving Oath’s future as murky as ever.

If you have information you would like to share, contact Abby Jackson.

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