Some advertisers are cooling on Oath and losing faith in Tim Armstrong's vision
- The ad-buying community is starting to doubt whether Verizon's will be able to build a digital ad powerhouse with Oath.
- Advertisers say they're uncertain about Oath's strategy and have grown impatient waiting for CEO Tim Armstrong's promise to build a duopoly competitor fueled by data to come to fruition.
Ad executives are starting to privately express doubts about Oath and CEO Tim Armstrong's ability to deliver on his vision for the Verizon-owned digital hodgepodge.
A year ago, at the Cannes advertising festival, Armstrong and his team officially unveiled the Oath brand (the name of which was first reported by Business Insider), along with a feel-good "family of brands" slogan and a slick marketing video narrated by Chuck D.
This year at Cannes the buzz surrounding Oath was close to nonexistent. Buyers expressed a general befuddled take on the company, which represents an amalgamation of digital brands including AOL, Yahoo, and Huffington Post, as well as layers of mobile apps and ad tech.
"It was almost like they were hiding," said one ad-agency CEO.
More than one ad buyer, when asked about Oath, hesitated before responding, "I just don't know."
One top marketer said Armstrong had been describing the strategy for the Oath brand "solar system" but has never been able to explain how that solar system all ties together. "Now it is just digital stuff owned by Verizon."
"The vision is muddied, the strategy is unclear," another top ad buyer said. "They are a jack-of-all-trades, but it's hard to discern what they are masters of, if anything."
That was not the idea when Verizon purchased AOL in 2015. Armstrong talked about challenging Google and Facebook in the digital ad race by leveraging Verizon's pool of wireless consumer data, AOL's tech and its network of sites.
"Data is the oil of the mobile economy," he told advertisers a few years ago, reported the Wall Street Journal.
Mac Delaney, SVP, media investment and innovation, at the digital ad firm Merkle, praised some pieces of Oath's ad technology, such as the Yahoo-built Gemini platform. But "in terms of the promise of the Oath platform, we've seen nothing," he said at Cannes.
Verizon was supposed to put some heat on Google and Facebook
Of course no one expected stitching together Yahoo and AOL was going to be easy, not to mention the mobile ad network Millennial Media (another Oath acquisition), as well as Microsoft's ad inventory, which AOL made a deal to sell in 2015.
And it's worth noting that when Armstrong took over at AOL, it was just being spun out of Time Warner and its revenue was in free fall. It took two and a half years, but he was able to turn AOL around. Yahoo was a much larger company, with a lot more moving parts.
For example, Oath properties had over 3,200 different kinds of ads. The plan is to reduce that number to roughly eight.
There were also big strategic decisions made before the Verizon deal that hindered Oath, such as decisions to pull back on Yahoo-branded mobile apps, said people familiar with the matter.
"It was epic reconstruction," Armstrong told Business Insider, who said Oath had removed about $1 billion in cost from Yahoo. "We've done major, major surgery."
He estimated that Oath was 75% through its integration at this point. But the company will be able to lay out a much more coherent and detailed strategy this fall.
In the meantime, Oath's perceived sluggishness on its integration is becoming more glaring in light of AT&T's aggressive deal making and bold claims.
Then there's the fact that Verizon just named a new CEO, Hans Vestberg, a relative outsider who is not seen as being big on content and advertising.
Almost immediately, the talk began. Was Armstrong - who still reports to outgoing CEO Lowell McAdam - supposed to get that CEO job? Meanwhile, Armstrong's name was recently leaked as being under consideration to succeed former WPP chief Sir Martin Sorrell, something Armstrong shot down publicly.
That hasn't halted the rumors. An ad executive who just returned from Cannes said he'd already heard that Verizon wants to sell Oath. Does Armstrong want to do that? Or does he want to leave?
Armstrong declined to comment on any rumors, but he reiterated his commitment to Oath. He recently told the publication LesEchos that he had turned down interest from WPP.
Oath has a big ad business, but its growth is underwhelming
Oath is expected to pull in $4.75 billion in ad revenue this year, according to eMarketer. That's hardly a disaster. But considering that it generated $4.62 billion in 2017, Oath's growth rate and volume pales in comparison to Google and Facebook, not to mention ascendant players like Amazon.
Oath posted $2.2 billion in revenue during the fourth quarter of 2017. But it's gross revenue slid by 13% during Q1 of this year.
Sorrell recently mentioned that the industry was hoping that Oath would emerge as a third contender. But he no longer sees that happening.
Oath is getting its ad tech stack in order
One area that ad buyers give Oath credit for is on the ad tech platform front. About a year ago, the company pledged to consolidate five different ad-buying software platforms into a single entity. And for the most part they've delivered, said Matthew Greitzer, cofounder and COO of the programmatic agency Accordant Media.
Through the former BrightRoll demand-side platform ('DSP'), advertisers can target ads using Yahoo and AOL email-address data, albeit anonymously, said Greitzer.
"They were not in the mix a year ago, and they've taken several steps forward," he said. "They've done what they said they were going to do."
Yet this more tactical side of Oath's business may not appeal to bigger brand-oriented advertisers who are more likely to be interested in sponsorships and video buys. Those are generally the folks being courted at Cannes.
So what's the problem at Oath?
Besides struggling to put out a consistent message, ad buyers say Oath has two big challenges.
For one, its brands are, in internet terms, perceived as old. Putting Yahoo or AOL on a media plan doesn't spark clients like YouTube or Snapchat.
Spending hundreds of millions on the just-shuttered, youth-aimed go90 surely hasn't helped matters.
Sources inside Oath said that go90 was getting the majority of the recent content investment, but that is set to change now that go90 is nearly gone.
"They're a tough sell right now," said a top buyer.
Armstrong brushed that idea off, pointing to the buying power of Oath's older consumers.
"If reaching people with money is out of fashion, then maybe we should stop right there," he said.
Armstrong said he understands the markets impatience. "I'm impatient too," he said. At Cannes, Armstrong laid out what he called Oath's "super channel strategy," which will see the company's content divisions focusing on its strengths in news, sports, finance and entertainment.
"We had incredibly positive customer meetings," he said. "People were telling us they want to spend more."
The bigger miss for Oath is that advertisers say it's moved too slowly on tying together all its data and tech assets.
Theoretically, between Verizon's consumer data (they know where subscribers live and what they do with their phones) along with AOL's and Yahoo's reams of email addresses, not to mention set-top data from Verizon Fios, Oath should have super-powerful data for ad-targeting purposes.
Plus, Oath has explored deals with other telecom companies to further enrich its data supply.
"I'm not sure how real that is yet," Greitzer said.
At Cannes, Armstrong's team held roughly 15 meetings with top marketing executives, and presented them with customized data insights and targeting options for their particular brands.
Some buyers say the company is making progress on the targeting front, but it's on a very small scale. Ad buyers say they aren't sure whether this conservative data approach is driven by technical or political concerns. One buyer said he's heard from Oath executives who are frustrated by their own limitations and are often in the dark on the timeliness for various ad product innovations.
GDPR may also have thrown a wrench in Verizon's data-targeting plans. It's worth noting that when Verizon acquired AOL in 2015, the EU was still a year away from passing the General Data Protection Regulation, or GDPR.
As the law took effect this past May, companies like Verizon suddenly faced a massive burden to ensure they had consent to use consumers' data. In fact, Verizon has spent the past eight months or so making sure it was compliant.
Some ad buyers blame Oath's internal politics as being a culprit for its slow execution. When it comes to challenging Facebook and Google on targeting "they overhyped big time," said one buyer.
Oath continues to make leadership tweaks. It's recently brought on a new COO from Alibaba. And while former chief revenue officer John DeVine recently left the company, former Viacom and Snapchat sales chief Jeff Lucas recently came on board as vice president of sales, Americas.
Armstrong is confident the companies mission and capabilities will soon become crystal clear.
"Our customers are really anxious for us to become a bigger partner [in the industry]," he said. "We're making progress."