Oath Inc. is a subsidiary of Verizon Communications. The company is the umbrella company for Verizon's digital and media subdivision, which include AOL and Yahoo!.
Within Oath, Yahoo! that was acquired in 2017 for $4.5 billion, and AOL acquired in 2015 for $4.4 billion, are both maintaining their respective brands. AOL itself also has a number of other media brands, including the Huffington Post (HuffPost).
What should be a big company with big assets, in a Securities and Exchange Commission filing, Verizon said that Oath is worth almost nothing.
With the announcement, Verizon is taking a big $4.6 billion write-down on Oath, which puts the goodwill valuation of the media brand at just about $200 million.
The write-down was the result of a re-accounting of the value of Oath, which occurred after Verizon replaced its old CEO, Lowell McAdam, with new CEO Hans Vestberg.
Before the re-accounting, Verizon said its Oath brand’s goodwill valuation was at $4.8 billion.
According to Verizon about Oath:
Yahoo! and AOL are two of the most expensive Verizon acquisitions, but the company didn't see great synergies it had expected from the two.
The Oath brand value was also further diminished when Yahoo! experienced massive data breaches that affected 500 million users, and later affected more than 1 billion users.
For the first nine months of 2018, Oath’s operating revenue was $5.6 billion, or about 6 percent of Verizon's overall $96.6 billion revenue during that same time period. Verizon doesn’t report Oath’s profitability separately, although it has indicated that the business was not performing well.
Verizon didn't even expect Oath to reach the company’s annual revenue target of $10 billion by 2020.
To save the company, Verizon said that it offered voluntary buyout deals to its 44,000 management employees, in which 10,400 of the managers had accepted the offer. The buyouts are part Verizon's bigger plan to cut out costs and shift Oath's emphasis to the wireless part of Verizon’s business.
The media and advertising business is a highly competitive space to jump into for any businesses, including Verizon which is a giant telecommunication company. This is true as competitors in the field include the more experienced and powerful Google and Facebook that dominate the sector.
Oath's rivals, including BuzzFeed, Vox Media and Vice, are also facing challenges similar to Oath's from the Facebook-Google duopoly, which controls more than half of all online ad spending.
Verizon's $9 billion bet on the digital media business is considered one of the worst blunders in the history of corporate America.