New leader in place as Marissa Mayer resigns and Verizon completes acquisition
By Lara O'Reilly
AOL chief executive and veteran ad salesman Tim Armstrong is ready to build a new empire, while Yahoo boss Marissa Mayer is leaving hers behind.
Verizon Communications announced Tuesday it had completed its $4.5 billion acquisition of Yahoo's core internet assets.
Ms. Mayer has opted to resign from Yahoo given the changes to her role following the close of the acquisition, the company said.
Yahoo will be merged with AOL, which Verizon bought for $4.4 billion in 2015, to create a new online media and advertising subsidiary called Oath, housing brands such as HuffPost, TechCrunch, Yahoo Finance, Tumblr and the pair's stack of advertising technology solutions.
The two companies will benefit from the data Verizon has on its subscribers, which will improve targeting and measurement for marketers looking for online advertising alternatives to Google and Facebook.
Distribution will also be a factor: Soon, some of Oath's content brands will be automatically available on the "decktop" of Verizon subscribers' phones through its AppFlash app, for example. Verizon's go90 mobile video app, will also become more integrated with Oath's content properties. And entirely new mobile content brands are set to launch before the end of the year, created by Oath's internal Factory unit.
Mr. Armstrong, who is now Oath's CEO, said: "The entire company is centering around brand building for mobile and building our content brands."
Mr. Armstrong declined to comment on Ms. Mayer's "decision process" behind her move, beyond referencing that the pair had planned its organizational structure together as they worked to integrate one public company inside another.
Ms. Mayer was widely expected to be leaving, despite saying last year that she planned to stick around. Her name was absent from the leadership team Mr. Armstrong listed in a memo to staff, which was reported by Recode in April.
"Given the inherent changes to my role, I'll be leaving the company," Ms. Mayer said in a note to employees, which she posted on Tumblr. "Looking back on my time at Yahoo, we have confronted seemingly insurmountable business challenges, along with many surprise twists and turns."
Mr. Armstrong confirmed reports that the company plans to lay off around 15% of staff, or 2,100 of the roughly 14,000 people in its combined workforce. The job cuts will mainly affect those in back office functions, where there are duplicate roles and teams.
Mr. Armstrong now has a job to maintain morale among the remaining team, but he said his staff are "excited about the differentiated strategy."
The acquisition was first announced in July last year, but was hampered after Yahoo then announced two separate hacking attacks that took place in 2013 and 2014, which led to 1.5 billion user accounts being compromised. After the disclosure of the data breaches, Verizon and Yahoo agreed to shave $350 million from the original offer price. The final price tag was a marked drop for one of the early web pioneers, which once had a market capitalization of more than $125 billion during the peak of the dot-com boom.
Mr. Armstrong had previously publicly stated that he wanted Oath to reach 2 billion consumers, up from around 1 billion currently, by 2020. He also previously aimed for Oath to boost revenue to more than $10 billion. Mr. Armstrong has now added a small "caveat" to that time frame as the deal took longer to close than expected.
Ahead of the acquisition closing, Verizon was predicted to generate $1.5 billion in net global digital ad revenue in 2017, according to research firm eMarketer. Yahoo was estimated to generate $3.2 billion in net digital ad revenue world-wide this year. Google and Facebook dominate the online ad market, with eMarketer estimating they will generate $73.8 billion and $36.3 billion in digital ad revenue world-wide this year respectively.
Oath's brands are best known in the U.S., thanks to Yahoo and AOL's portal businesses that provided many consumers with their first access to internet services such as email.
Oath's global growth plan will be centered on a limited number of key markets to extend its audience outside the U.S., including western Europe, Japan, Taiwan and Singapore. Mr. Armstrong said he also wouldn't rule out acquisitions to help Oath achieve its targets.
Some social-media scorn was poured over Oath's corporate branding when it unexpectedly leaked through a Business Insider article in April. Mr. Armstrong quickly responded with a tweet, confirming the new name. He said that tweet earned Oath "3.5 billion media impressions" globally, which would have cost $100 million in ad placements. The company conducted a study afterward and found 70% of people were positive about the brand, 15% were neutral and 15% were negative.
Mr. Armstrong said: "The other positive thing to note on this is we didn't do this the normal way; we didn't hire consultancies [or a] branding naming agency; we basically built the entire brand ourselves internally."
Building media and tech brands is something Mr. Armstrong has form in. From co-founding a magazine in his early 20s called "Beginnings in Boston," aimed at young people starting out in their careers, he moved into sales roles at a variety of early internet companies in the 1990s. He eventually joined Google, helping grow key ad products, including AdSense and DoubleClick. Mr. Armstrong became CEO of AOL in 2009.
Ross Levinsohn, Yahoo's former interim CEO who was in the running to lead the company permanently but was replaced by Ms. Mayer in 2012, said Mr. Armstrong is well-positioned to lead Oath:
"He understands the businesses as well as anyone, is a dynamic leader and [is] well respected," Mr. Levinsohn said. "He has a well-heeled parent...if they allow him freedom, flexibility and provide more capital to acquire other businesses, then his goals are possible."
Write to Lara O'Reilly at lara.o'[email protected]