insiders say Verizon’s marriage of Yahoo and AOL was always doomed

Oath
CEO Tim Armstrong

Scott
Olson/Getty Images

• After Verizon combined AOL and Yahoo to form Oath,
  there were hopes it would challenge the Facebook-Google
  duopoly.
• But the integration between AOL and Yahoo has never
  been on solid footing, according to former senior AOL
  employees.
• Dysfunction can be traced to three main problems at the
  company: Yahoo’s culture, high employee turnover, and an
  inconsistent strategy at Oath.
• Now, with reports that Oath CEO Tim Armstrong is in
  discussions to leave the company, Oath’s future is murkier than
  ever.

In 2017 Verizon seemingly had all
of the components necessary to mount a legitimate alternative 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
this 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.

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, with executives at both
companies 
had a year
of 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 Natalie 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
which 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 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
t
his 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.

‘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 will 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.

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