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By selling AOL and Yahoo, Verizon finally admitted its multibillion-dollar mistake

It tried to build a media business. And tried and tried again. And then tried some more.

By selling AOL and Yahoo, Verizon finally admitted its multibillion-dollar mistake

The $5 billion is about half what it paid for the two companies.

Image: Yahoo and David Pierce

Verizon's failures as a media company are approaching unparalleled territory. It poured an estimated $1.2 billion into Go90, including acquiring Vessel and OnCue, before shutting the whole thing down. It bought AwesomenessTV, valued then at $650 million, and sold it for $50 million. It sold Tumblr and The Huffington Post for tiny fractions of their previous value.

But the most spectacular of Verizon's media misfires ended on Monday, when Verizon announced it was selling AOL and Yahoo to Apollo Global Management for $5 billion. That's about half what it paid for the two companies, not including the huge sums it has poured into trying to make them a big business. At their peaks, AOL and Yahoo were worth about $325 billion combined. Now even $5 billion seems like a lot.

When Verizon bought the companies — AOL in 2015 and Yahoo in 2017 — the idea was to bring two giant brands together to form a third advertising giant next to Facebook and Google. It made a certain kind of sense: The market is so large that even a distant third- or fourth-place player would be a mammoth business. Yahoo and AOL both also operated huge media businesses, and had first-party email and other products that could have helped Verizon compete head-on with the ad giants. "The world is going mobile, and it is going there really quickly," AOL's then-CEO Tim Armstrong said when Verizon bought the company.

The theory behind the acquisition was the right one: Streaming did quickly come to dominate the internet. But in trying to buy its way to scale, Verizon bought two slowly dying brands, merged them into one, renamed the whole thing to Oath, and watched it all die even faster. By 2018, Verizon had already written down Oath's value by more than $4 billion. At about the same time, as Hans Vestberg took over as Verizon's CEO, it became clear that the company was going to spend its time and money on 5G spectrum and infrastructure projects, rather than trying to build media brands. Verizon splashed $53 billion on 5G spectrum in an auction earlier this year, and is spending billions more on its broadband infrastructure.

In recent years, Verizon's content moves have been almost entirely about partnerships. It offers Disney+, Apple Music, Discovery+ and other services to subscribers, often for free. The old Verizon thought it had to make and distribute its own content to be more than a dumb pipe; the new one believes that combining billing, accounts and data into a single place might be enough.

As for Yahoo and AOL? Apollo is putting the whole company under the Yahoo brand, thus making it the third company to try and make Yahoo cool again. (The exclamation point is still gone, though.) It's hard to know what, exactly, it will look like. "Apollo has a powerful vision that includes aggressively pursuing growth areas in commerce, content and betting," Vestberg said in a memo on Monday. He also noted the synergies with Apollo's other investments, like Harrah's, Norweigan Cruise Lines and Chuck E. Cheese's, "who can benefit from Media's e-commerce platform."

Some of Yahoo's most successful products, like Yahoo Finance and Yahoo Fantasy, should figure prominently into that future. Sports betting in particular has become a cornerstone of the media business. But the new Yahoo also still owns a search engine, a mail service and brands like Netscape and CompuServe. Yahoo Mobile, a new MVNO, was another play for relevance that made slightly more sense inside Verizon than it will for Apollo. And Yahoo has put a lot of resources into Yahoo+, a subscription service that encompasses a lot of Yahoo products and some others.

Building a suite of barely-related products is a risky move for a beloved brand, and a head-scratching one for a brand whose relevance peaked two decades ago. Vestberg said Apollo was the right partner because it leveraged "the entire Verizon Media ecosystem of adtech, affiliate relationships, data, insights, targeting and reach." The appeal of the ad tech world may be stronger than ever, as the backlash against the Facebook-Google duopoly continues and as companies like Amazon and Roku prove there's plenty of digital ad money to go around.

But Apollo will have to figure out what Yahoo is, what it isn't, and whether anyone cares, or risk watching the company's value crash even further.

A version of this story will be in tomorrow's Source Code newsletter. Sign up here.

Protocol | China

China’s edtech crackdown isn’t what you think. Here’s why.

It's part of an attempt to fix education inequality and address a looming demographic crisis.

In the past decade, China's private tutoring market has expanded rapidly as it's been digitized and bolstered by capital.

Photo: Getty Images

Beijing's strike against the private tutoring and ed tech industry has rattled the market and led observers to try to answer one big question: What is Beijing trying to achieve?

Sweeping policy guidelines issued by the Central Committee of the Chinese Communist Party on July 24 and the State Council now mandate that existing private tutoring companies register as nonprofit organizations. Extracurricular tutoring companies will be banned from going public. Online tutoring agencies will be subject to regulatory approval.

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Shen Lu

Shen Lu is a reporter with Protocol | China. She has spent six years covering China from inside and outside its borders. Previously, she was a fellow at Asia Society's ChinaFile and a Beijing-based producer for CNN. Her writing has appeared in Foreign Policy, The New York Times and POLITICO, among other publications. Shen Lu is a founding member of Chinese Storytellers, a community serving and elevating Chinese professionals in the global media industry.

After a year and a half of living and working through a pandemic, it's no surprise that employees are sending out stress signals at record rates. According to a 2021 study by Indeed, 52% of employees today say they feel burnt out. Over half of employees report working longer hours, and a quarter say they're unable to unplug from work.

The continued swell of reported burnout is a concerning trend for employers everywhere. Not only does it harm mental health and well-being, but it can also impact absenteeism, employee retention and — between the drain on morale and high turnover — your company culture.

Crisis management is one thing, but how do you permanently lower the temperature so your teams can recover sustainably? Companies around the world are now taking larger steps to curb burnout, with industry leaders like LinkedIn, Hootsuite and Bumble shutting down their offices for a full week to allow all employees extra time off. The CEO of Okta, worried about burnout, asked all employees to email him their vacation plans in 2021.

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Stella Garber
Stella Garber is Trello's Head of Marketing. Stella has led Marketing at Trello for the last seven years from early stage startup all the way through its acquisition by Atlassian in 2017 and beyond. Stella was an early champion of remote work, having led remote teams for the last decade plus.

It’s soul-destroying and it uses DRM, therefore Peloton is tech

"I mean, the pedals go around if you turn off all the tech, but Peloton isn't selling a pedaling product."

Is this tech? Or is it just a bike with a screen?

Image: Peloton and Protocol

One of the breakout hits from the pandemic, besides Taylor Swift's "Folklore," has been Peloton. With upwards of 5.4 million members as of March and nearly $1.3 billion in revenue that quarter, a lot of people are turning in their gym memberships for a bike or a treadmill and a slick-looking app.

But here at Protocol, it's that slick-looking app, plus all the tech that goes into it, that matters. And that's where things got really heated during our chat this week. Is Peloton tech? Or is it just a bike with a giant tablet on it? Can all bikes be tech with a little elbow grease?

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Karyne Levy

Karyne Levy ( @karynelevy) is the West Coast editor at Protocol. Before joining Protocol, Karyne was a senior producer at Scribd, helping to create the original content program. Prior to that she was an assigning editor at NerdWallet, a senior tech editor at Business Insider, and the assistant managing editor at CNET, where she also hosted Rumor Has It for CNET TV. She lives outside San Francisco with her wife, son and lots of pets.

Protocol | Workplace

In Silicon Valley, it’s February 2020 all over again

"We'll reopen when it's right, but right now the world is changing too much."

Tech companies are handling the delta variant in differing ways.

Photo: alvarez/Getty Images

It's still 2021, right? Because frankly, it's starting to feel like March 2020 all over again.

Google, Apple, Uber and Lyft have now all told employees they won't have to come back to the office before October as COVID-19 case counts continue to tick back up. Facebook, Google and Uber are now requiring workers to get vaccinated before coming to the office, and Twitter — also requiring vaccines — went so far as to shut down its reopened offices on Wednesday, and put future office reopenings on hold.

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Allison Levitsky
Allison Levitsky is a reporter at Protocol covering workplace issues in tech. She previously covered big tech companies and the tech workforce for the Silicon Valley Business Journal. Allison grew up in the Bay Area and graduated from UC Berkeley.
Protocol | China

Livestreaming ecommerce next battleground for China’s nationalists

Vendors for Nike and even Chinese brands were harassed for not donating enough to Henan.

Nationalists were trolling in the comment sections of livestream sessions selling products by Li-Ning, Adidas and other brands.

Collage: Weibo, Bilibili

The No. 1 rule of sales: Don't praise your competitor's product. Rule No. 2: When you are put to a loyalty test by nationalist trolls, forget the first rule.

While China continues to respond to the catastrophic flooding that has killed 99 and displaced 1.4 million people in the central province of Henan, a large group of trolls was busy doing something else: harassing ordinary sportswear sellers on China's livestream ecommerce platforms. Why? Because they determined that the brands being sold had donated too little, or too late, to the people impacted by floods.

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Zeyi Yang
Zeyi Yang is a reporter with Protocol | China. Previously, he worked as a reporting fellow for the digital magazine Rest of World, covering the intersection of technology and culture in China and neighboring countries. He has also contributed to the South China Morning Post, Nikkei Asia, Columbia Journalism Review, among other publications. In his spare time, Zeyi co-founded a Mandarin podcast that tells LGBTQ stories in China. He has been playing Pokemon for 14 years and has a weird favorite pick.
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