Verizon continues quest to correct content car crash

The Verizon mission to conquer the content world has been anything but a smooth ride to date, and now it is reportedly searching for a buyer for Tumblr.

According to the Wall Street Journal, Verizon executives are on the search to offload the platform. The Verizon Media Group has been under considerable pressure in recent months, as the promise of value through content and diversification has eluded the telco.

Looking at the most recent earnings call, Verizon Media Group revenue was $1.8 billion, down 7.2% year-on-year for the quarter. Declines in desktop advertising were primarily blamed, with the dip continuing to more than offset growth in mobile and native advertising. Considering the effort the telco had to exert to acquire Yahoo, not to mention the headaches it had to endure, some might have hoped there would be more immediate value.

The last couple of months have seen Verizon attempt to make money from the mockery, with a particular focus on job cuts. In January, it was announced 7% of the media unit’s workforce, some 800 roles, would be sacrificed to the gods of profits, and now it seems Tumblr is being marshalled to the alter.

What is worth noting is this is a platform which has promise.

After being acquired by Yahoo during 2013 for $1.1 billion, Verizon inherited Tumblr through the much mangled $4.8 billion acquisition of Yahoo in 2017. Although some might struggle to understand what Tumblr does, the all-encompassing blogging platform currently has 465.4 million blogs and 172 billion posts.

Tumblr is a tricky one to understand what it actually does, but instead of trying to pigeon hole it into a definition perhaps the better approach would be to let it just be itself. Tumblr defines itself as a blank canvas, allowing users to post text, photos, GIFs, videos, live videos and audio, or pretty much anything the user wants to.

Perhaps this is why Verizon has struggled with the brand and presumably failing to realise the potential. Telcos generally cultivate traditional and relatively closed-minded cultures. With Tumblr just being itself, rather than fitting into a tidy tick-box exercise, Verizon may be struggling to communicate the value to customers or even devise an out-of-the-box business model to monetize it effectively.

This assessment is perhaps supported by where the media business has seen success. Financial news for example, or the delivery of sports content. These are not exactly complex business models to understand, more difficult to deliver however, as they are more functional. These are the areas CFO Matt Ellis was boasting about during the earnings call.

While there has not been any official commitment or denial to the rumours from Verizon so far, there does seem to be some appetite from the industry. According to Buzzfeed, Pornhub VP Corey Price is ‘extremely interested’ in potentially acquiring Tumblr, promising to re-discover the NSFW edge, one of the factors which drove the popularity of Tumblr during the early days.

The future of Tumblr might be a bit hazy for the moment, but one thing is clear. Verizon is mapping out a very effective usecase on how not to diversify into the content world.

Verizon cuts 7% of media jobs as calamitous headache continues

To say Verizon’s efforts to capitalise on the digital advertising revenues have been troubled would be an early contender for understatement of the year.

Following a $4.6 billion write down during the last quarter, Verizon has announced it will be laying off 7% of staff, roughly 800 people, at the media business. In an email seen by CNBC, Verizon Media Group CEO Guru Gowrappan positioned the cuts as part of a broader strategy to turn around the disaster, focusing on three key areas:

  • Growing the ‘member-centric ecosystem’
  • Increasing usage/spending on its B2B products
  • Increasing video supply and distribution

“Last quarter, our leadership team worked to create the strategy that will propel Verizon Media,” Gowrappan said in the email. “We honestly assessed where we are and outlined ambitious but achievable goals that poise us for growth. We shared it broadly with you, and together committed to deliver on our OKRs with meticulous planning, collaboration and rigorous execution.”

In short, the acquisition of Yahoo has been nothing short of a disaster for Verizon. When it was first announced, despite the logical ambition to diversify revenue channels, some were looking at the deal with curiosity. Yahoo certainly had some interesting media properties, the Huffington Post and Tumblr for example, but it didn’t seem like the best way to spend $4.5 billion.

In the months that followed, a monumental data breach emerged, reportedly effecting every single Yahoo account, a decision was made to kill off a very popular news aggregation app, boss Tim Armstrong decided to quit, Verizon had to stomach a $500 million pre-tax charge relating to severance, acquisition and integration costs, and it ditched the Oath branding. All of this was before the December write down of $4.6 billion, and not taking into account the previous acquisition of AOL.

Now in the pursuit of salvaging a gargantuan headache, the team will be trimming 7% of jobs to turn around the business. Verizon might have been searching for alternative revenues and a way to demonstrate to shareholders it can make an impact in blossoming corners of the digital economy, challenging the likes of Google and Facebook for advertising dollars, but this was nothing short of a calamity.

All we now need is a fire, an unplanned pregnancy and Armstrong to appear as the new local pub landlord, and you wouldn’t be able to tell the difference between Verizon’s media business or an episode of East Enders.

You can read the full email below (courtesy of CNBC):


 

Team –

Last quarter, our leadership team worked to create the strategy that will propel Verizon Media. We honestly assessed where we are and outlined ambitious but achievable goals that poise us for growth. We shared it broadly with you, and together committed to deliver on our OKRs with meticulous planning, collaboration and rigorous execution.

As hard as it may have felt at times, we’ve made some great strides to serve our customers globally – from consolidating ad platforms, to expanding the Microsoft partnership, growing live programming and content offerings for our Supers, and prioritizing and launching 8 new or substantially updated products at Build It 2018.

In Q1, we’ll have 3 priority areas: first, grow our member-centric ecosystem with must-have mobile and video products and stem desktop declines; second, increase usage and spends flowing through B2B platforms; third, expand our video supply and overall distribution through partnerships. As we work to deliver on both short-term objectives to stabilize our business, we are also focused on long-term strategies that will accelerate distribution, growth and innovation as part of Verizon.

This week, we will make changes that will impact around 7% of our global workforce across the organization, as well as certain brands and products. These were difficult decisions, and we will ensure that our colleagues are treated with respect and fairness, and given the support they need. Resources and other career support will be provided to help our team members navigate the transition.

In addition, we’ve completed an exhaustive review to prioritize the programs that are currently in our portfolio – consumer products, ad products, platform features, partnerships and data centers.

While every business unit has to manage their P&L, these decisions are being made to streamline resources and invest in opportunities that will help us grow. You all know by now that I deeply believe in an owner mindset and focus as a key ingredient for success – going deep on fewer, key things that will have the greatest impact on our customers and business, and doing them exceptionally well.

I want to be clear that we will continue to scale, launch new products and innovate. We are an important part of Verizon and the $7+ billion in revenue we generate through our member-centric ecosystem puts us among the top tech/media companies in the world. Now is the time to go on the offensive, go deep on our big priorities and do everything we can to advance the business. We will talk more about this and answer questions Friday at Open House.

Our world continues to evolve at a faster pace, and we need to leap ahead of consumer trends. We are reimagining our future, and building new products that will become invaluable to consumers today and in the years to come. That’s the spirit of our company and the spirit we all embody as its Builders.

Best,

Guru

Verizon breaks Oath

Less than two years after coming up with the name ‘Oath’ to encompass all its media properties, Verizon has sensibly concluded it’s a rubbish name.

As a result it’s being rebranded as Verizon Media Group, a much more prosaic, utilitarian name and more of a default description than a brand, but nonetheless better than Oath. We don’t know how much good money was thrown after bad in trying to polish this turd of a name, but Verizon at least deserves credit for not persisting with it indefinitely.

“I’m excited today to share that beginning January 8, 2019, Verizon Media Group will replace the Oath brand, representing our strong alignment as a core pillar of Verizon’s business,” wrote K. Guru Gowrappan, who replaced former AOL boss Tim Armstrong just ten days ago at the top of Oath. The immediate renaming of the group would appear to be a fairly symbolic act by Gowrappan and Armstrong is only hanging around until the end of the year.

The rest of Gowrappan’s post commenced with the standard ‘this just goes to show how well everything’s going’ corporate spin that it’s apparently compulsory to attach to any announcement. After that we got a list of all the specific things that have gone well at the artist formerly known as Oath, in case any doubt remained about how well things are going.

Most of those focused on Yahoo sub-brands, which must surely remain a work in progress. In basing its move into digital media on a couple of very faded internet brands – Yahoo and AOL – Verizon created a branding challenge for itself that it attempted to solve with Oath. Having acknowledged that mistake it wouldn’t be surprising to see further rebranding done within the Verizon Media Group.

Verizon might have launched 5G, but new iPhone pulls subscribers

Verizon published Q3 results, beating market estimates on earnings and subscriber adds.

Verizon published Q3 results today, narrowly beating market expectations. On the wireless side, Verizon Wireless added 510,000 net postpaid smartphone subscribers, with the postpaid churn rate at 0.8%. The strong marketing activities following the launch of the new iPhone, including an offer of up to $750 off new models, has helped attract new subscribers. As an important operation landmark right at the end of Q3, Verizon launched fixed wireless access service on 5G in four cities, therefore could claim to be the first to offer 5G in the country.

“Verizon has posted a third quarter of strong operational and financial performance,” said CEO Hans Vestberg. “With the beginning of the 5G era in this fourth quarter, we expect that trend to continue. We are investing in networks, creating platforms to add value for customers and maintaining a focused, disciplined strategy. Verizon is best positioned to take full advantage of the opportunities offered by the new game-changing generation of technology.”

On the broadband and TV side, Verizon’s Fios gained 54,000 new internet users, slower than the 66,000 it gained the same period last year, and lost 63,000 cable TV subscribers, faster than the 18,000 it lost last year, another indication that the cord-cutting trend shows no sign of abating.

Verizon Wireless continued to make the largest financial contribution. It generated $23 billion revenue (70.5% of group total) and brought in $11 billion EBITDA (90% of group total). The wireline business’ total revenues went down by 3.7% to $7.4 billion. The consumer side of the wireline business largely held at $3.1 billion (-2.1% year on year), with the corporate business dropped by over 5%.

On the group level, the total revenues of $32.6 billion, up 2.8% from last year, beating market expectation by $110 million, with non-GAAP earnings per share of $1.22, beating expectations by $0.03. GAAP EPS of $1.19 was right in line with market expectations.

Like most telecom operators, Verizon is a mature business that does not often disappoint but seldom excites. The management guidance pointed to low-to-mid single-digit percentage of full-year consolidated revenue growth and low single-digit percentage growth in EPS, which makes us pay some attention to another area of interest, Oath, the Media & IoT business mainly comprised of AOL and Yahoo.

If Verizon was to bank on this division to herald its future growth then it might be disappointed. Total revenues went down from $2 billion a year ago to $1.8 billion. More importantly, Verizon does not expect Oath to hit the $10 billion revenue target it set for the division earlier.

Verizon’s share price gained by 1.4% in pre-market trading.

Twitch is blocked by China’s Great Firewall

The Amazon-owned game streaming platform Twitch confirmed on Friday that it became inaccessible from China, the latest of a string of popular services banned from the world’s largest internet market.

That China has banned another internet site can hardly hit the headlines nowadays. On the contrary, often it is the clandestine or not so clandestine efforts from those blocked to re-enter China that are making the news. As a matter of fact, among the top 10 most visited websites based on the traffic data from the analytics company Alexa Internet (not the personal assistant from Amazon, but an Amazon subsidiary nonetheless), four are entirely blocked (Google, YouTube, Facebook, Twitter), one is partially blocked (Wikipedia), one is accessible (Yahoo), the rest are China-based.

The reason that the twist on Twitch has caught media attention is that it has suddenly gained popularity in the last month, not the least because e-sports were included in the recent Asian Games in Jakarta, a regional multi-sport event with the number of competing athletes next only to the Olympics. Following the Games, Twitch’s iOS app climbed to the 3rd position in Apple’s App Store in China, before it was quietly taken down, presumably another measure to comply with local regulations.

E-sports have been attracting stronger following in recent years, and special events have taken place in different parts of the world, where spectators would travel to follow the stars they have followed on platforms like Twitch. However the Asian Games was the first time e-sports were sharing the stage with other “real” sports.

China’s attitude towards e-sports, and the games industry in general is mixed. It is the world’s largest video game market, host to the world’s largest publisher (Tencent), and has a total number of video game players larger than the total population of the United States. But it also banned game consoles sales for a number of years, and its official media has also repeatedly underscored the “harm” video games can do to young people’s mental development. Despite the extensive coverage of the Asian Games, where China dominated the medal table, the state-owned China Central Television (innocuously abbreviated as “CCTV”) did not cover the e-sports section at all, leading to the sports channel’s chief producer alluding to this gap in his latest column (in Chinese).

“I can’t say I am surprised by the crack down on Twitch,” said Nitesh Patel, director of Wireless Media Strategies of the research firm Strategy Analytics. Live video streaming, including game steaming, has taken China by storm in recent years. Large amounts of money and time have been spent on following streaming stars. “The authorities are concerned about gaming addiction and, as a consequence, players like Tencent have implemented features to limit the time children spend playing addictive titles like Honor of Kings. The recent reported spike in use in Twitch may have caused some concern among authorities and they have moved to pull the plug before momentum continued,” added Patel.

Likely to benefit from the ban will be local game streaming platforms, for instance Douyu, Huya, Panda TV, similar to WeChat benefiting from the ban on WhatsApp, Badu on the ban of Google in the past.

Softbank and Yahoo team up to crack mobile money in Japan

Softbank and Yahoo Japan have announced the formation of a new joint venture, PayPay, to launch a QR-based smartphone payment services in Japan by November.

The joint venture will lean on the experience of Paytm, India’s largest digital payment brand and a SoftBank Vision Fund portfolio company, for technology and expertise in mobile payments in the latest efforts to move Japan away from a cash-based society. As it stands, less than 20% of payments across the country are cashless, one of the lowest worldwide for a ‘developed’ economy.

“The Japanese government is taking measures to raise the cashless payment ratio to 40% by 2025, with a long-term goal of 80%, the highest level globally,” Softbank said in a statement. “To aid these efforts, SoftBank and Yahoo Japan established PayPay Corporation in June 2018 and will launch its user-oriented payments platform in the fall 2018.”

With the experience of Paytm, the brand has 300 million customers and 8 million merchants, combined with the presence of SoftBank and Yahoo Japan, the PayPay business certainly has a promising to start to disruption. The Yahoo! Wallet which has approximately 40 million accounts, will act as the foundation, with Softbank leading the sales strategy, while also developing a localised service leveraging Paytm’s technology. Once the new service has been launched, Yahoo Wallet will cease to exist, though a time-frame has not been laid out.

While the adoption of this technology is far from given, the venture does demonstrate the power of the Softbank ecosystem. While it might have looked like a side-project to keep billionaire CEO Masayoshi Son busy, the Softbank Vision Fund offers a wealth of technology expertise for family members to lean on and launch new services. Of course, Vision Fund employees will be looking to find investments which will make money in the long-run, but complementary businesses and technology to aid the progression of current new services would certainly play some role in the decision making.

Verizon spends billions on NFL rights to give Oath a boost

US telco Verizon has announced a new deal with the NFL – i.e. American Football league – to distribute games across its digital media network.

This appears to be an attempt to answer the oft-asked question: “What’s the point of dropping billions of dollars on a couple of internet dinosaurs?” Verizon, in its infinite wisdom, has focused its diversification efforts on the acquisition of AOL and Yahoo, which were kind of a big deal 20 years ago. It decided to call the digital media formed from them Oath earlier this year and has now decided to give it an injection of premium content.

“We’re making a commitment to fans for Verizon’s family of media properties to become the mobile destination for live sports,” said Lowell McAdam, Chairman and CEO of Verizon. “The NFL is a great partner for us and we are excited to take its premier content across a massive mobile scale so viewers can enjoy live football and other original NFL content where and how they want it. We believe that partnerships like this are a win for fans, but also for partners and advertisers looking for a mobile-first experience.”

“Verizon has been a key NFL partner, both in the distribution of games on NFL mobile and as a sponsor, since 2010 and we’re thrilled to be both extending and expanding our relationship with them,” said NFL Commissioner Roger Goodell. “Our expanded partnership with Verizon is great for our fans.  Starting with the upcoming playoffs and for seasons to come, live NFL action directly on your mobile device – regardless of carrier – will give millions of fans additional ways to follow their favourite sport.”

As the quotes above touch upon, this deal marks the end of Verizon’s exclusivity, but it will now be able to offer the games to anyone via Yahoo sports and that sort of thing. They haven’t announced the numbers but reports have it between $1.5-2 billion for a five-year deal. At a time when the ROI of telco spending on premium content in coming under question this deal marks a distinct doubling down by Verizon.

Verizon now thinks all Yahoo accounts were affected by 2013 breach

Having finally completed its acquisition Verizon has been able to do a proper job of investigating the extent of the Yahoo data breach and the results are not good.

An announcement from its content division, which Verizon for some reason decided to call Oath, revealed that all of three billion Yahoo accounts in existence at the time of the 2013 data theft were affected. Prior to its acquisition by Verizon Yahoo had insisted that a maximum of one billion accounts had been affected, so that’s quite a bit difference.

It looks like Verizon brought in some third party cyber security and forensics experts, something it would have been reasonable to expect Yahoo to do prior to the acquisition, and they helped it come to this bleak conclusion. The company insists this is not a new security issue as password and financial information was not stolen, but the additional two billion accounts affected could be forgiven for taking these reassurances with a pinch of salt.

“Verizon is committed to the highest standards of accountability and transparency, and we proactively work to ensure the safety and security of our users and networks in an evolving landscape of online threats,” said Chandra McMahon, Chief Information Security Officer at Verizon. “Our investment in Yahoo is allowing that team to continue to take significant steps to enhance their security, as well as benefit from Verizon’s experience and resources.”

This leads us to question, once more, why Verizon didn’t just bail on the deal when it was clear how badly the breach had been managed by Yahoo, or at least get a much bigger reduction on the price. Not only might Verizon now be liable for compensation and/or legal recrimination, but it’s Oath division has taken a publicity hit almost as severe as the name itself. Surely whatever underlying value Yahoo might provide isn’t worth all this hassle and expense.