If You're Surprised By Verizon's AOL, Yahoo Face Plant, You Don't Know Verizon

from the yet-another-face-plant dept

So for years we've been pointing out that Verizon's attempt to pivot from grumpy old telco to sexy new Millennial ad brand hasn't been going so well. Oddly, mashing together two failing 90s brands in AOL and Yahoo, and renaming the coagulated entity "Oath," didn't really impress many people. The massive Yahoo hack, a controversy surrounding Verizon snoopvertising, and the face plant by the company's well-hyped Go90 streaming service didn't really help.

This week, Verizon was forced to acknowledge that Oath was now effectively worthless, at least in full context of what Verizon paid for it, and the company's past claims that the company would be taking on Facebook and Google in the online advertising wars for a generation to come:

"Verizon announced Tuesday that it would take a $4.6 billion writedown on its the media unit, which includes Yahoo and AOL. Oath's brand value is now worth just $200 million, according to Verizon. That's a stunning decrease in value since it formed in 2017. Verizon said Oath's brand was worth $4.8 billion when it last accounted for the company's goodwill valuation. With virtually no goodwill brand value, Oath's overall value (assets and goodwill) is now worth half of what it was a few years ago.

While some folks reacted with "shock" on Twitter, none of this should really have been a surprise to anybody who has watched Verizon do business over the last decade or two.

Pretty much every time Verizon wanders outside of its core competencies (operating admittedly excellent networks, lobbying to hamstring competition, being misleading about net neutrality), Verizon falls flat on its face. Whether it's the company's failed Go90 platform, failed video joint venture with RedBox, failed news website Sugarstring (which you may recall tried to ban reporters from talking about surveillance or net neutrality), its app store, its "me too" VCAST apps, or any of a dozen other countless efforts to expand into less familiar territory, Verizon failed. Usually semi-spectacularly.

This happens because having spent the better part of a generation engaged in turf protection and lobbying, telcos really can't innovate. We've known this for more than a decade, yet somehow, each time Verizon announces some new pivot, we forget. Telecom executives tend to think they can overcome this character flaw via megamerger, which usually just saddles the company with oodles of additional debt, but doesn't really address any of the sector's core shortcomings, built on the back of being largely government-pampered natural monopolies for the better part of a generation.

A big part of Verizon's attempted pivot to Millennial video ads was courtesy of former CEO Lowell McAdam, who left the company last summer. His predecessor, Ivan Seidenberg, believed that Verizon should remain focused on what it does best (sometimes): building better, faster networks. Seidenberg was a big reason for the company's $24 billion push into pure fiber with "FiOS." McAdam came in, froze most of those deployments, then tried to turn a legacy telco into Google. It didn't work, and anybody who is surprised by that hasn't watched Verizon do business.

All of that said, a company SEC filing effectively blamed McAdam and his team for the failure. As of this writing, that appears to have been enough to satisfy the company's investors, who are clearly eager to ride the hype waves emanating from Verizon's next big unfulfilled promise.

Filed Under: internet, media, telcos, writedowns
Companies: aol, oath, verizon, yahoo

Verizon Dinged Again For Privacy Violations, This Time For Slinging Personalized Ads To Kids

from the what-privacy-law? dept

Oh Verizon. For years we've noted how the company's consumer privacy practices are utterly abysmal. Like that time in 2016 when Verizon was fined a relative pittance by the FCC for modifying user wireless packets so it could covertly track users around the internet (beyond cookie, clickstream, or even deep packet inspection data). This being Verizon, it didn't bother to tell anybody that this was happening. As a result, it took two years for security researchers to even notice what the company was up to, and another six months of media yelling before the company was willing to even let consumers opt out of the data collection.

Fast forward to this week, and Verizon has been busted once again on the privacy front, this time for slinging behavioral advertisements at kids in violation of the Children’s Online Privacy Protection Act (COPPA). According to an announcement by acting New York Attorney General Barbara Underwood, Verizon's Oath operations (the mash up of its Yahoo and AOL acquisitions) routinely auctioned off ad space and placed ads on websites the company knew targeted kids -- without parental consent. As a result, Verizon's being hit with the biggest fine in the history of COPPA:

"The Attorney General’s Office found that AOL conducted billions of auctions for ad space on hundreds of websites the company knew were directed to children under the age of 13. Through these auctions, AOL collected, used, and disclosed personal information from the websites’ users in violation of COPPA, enabling advertisers to track and serve targeted ads to young children. The company has agreed to adopt comprehensive reforms to protect children from improper tracking and pay a record $4.95 million in penalties, the largest penalty ever in a COPPA enforcement matter in U.S. history."

But much like the company's fine for its earlier scandal, the fine itself is likely a small fraction of the money made during the time AOL spent intentionally turning a blind eye as behavior ads were aimed at kids and kid-frequented websites. The AG's report notes that until late last year (presumably as a result of realizing the AG inquiry existed), AOL's systems ignored any information that it received from an ad exchange indicating that the ad space was subject to COPPA, so the website routinely ignored the law in general. It's worth noting that the full settlement has not yet been released.

There's no indication from the NY AG (I've reached out for more detail) how long this was going on, but it's fairly obvious the income AOL made from ignoring COPPA (there were 1.3 billion auctions of display ad space) outweighs any penalty it's facing, however historic. COPPA is one of the few privacy regulations currently in place, and even then, Verizon/AOL/Oath's decision to just ignore the law speaks pretty broadly as to how even the privacy laws we do have are inconsistently enforced. Especially when we're talking about deep-pocketed telecom giants, who have openly flirted with the idea of charging users even more money for privacy without regulators so much as batting an eye.

As we sit down and begin the long, difficult conversation about what a real internet-era privacy law should look like, the lion's share of the focus remains (quite justly given the Cambridge Analytica scandal) on Facebook. But it can't be understated how the telecom industry has historically been even worse -- especially given they're effectively bone-grafted to the nation's intelligence surveillance apparatus. That these are the companies that will have the biggest impact on the crafting of privacy laws should terrify anyone interested in getting meaningful privacy legislation right.

Filed Under: barbara underwood, coppa, new york, parental consent, privacy, targeting kids
Companies: aol, oath, verizon, yahoo

Verizon's Pivot From Stodgy Old Telco To Sexy Millennial Ad Brand Isn't Going So Well

from the you're-not-built-for-this dept

We've noted for some time now how Verizon desperately wants to pivot from dull old broadband provider to sexy, Millennial-focused video advertising juggernaut. To accomplish this task, Verizon acquired both Yahoo and AOL, smushed them together, then hoped this would be enough to compete with the likes of Google and Facebook. The effort distracted the company from upgrading or repairing much of its fixed-line broadband footprint, since investing in networks isn't profitable enough, quickly enough, for many on Wall Street.

But Verizon's pivot hasn't been going so well. The company's Go90 video platform, which was supposed to be the cornerstone of the company's effort, recently fell flat on its face after Verizon spent $1.2 billion on the effort. And the company's Oath ad network, the combination of AOL and Yahoo, hasn't been doing much better, with Tim Armstrong (formerly of AOL) now heading for the exit (warning: annoying paywall):

"Mr. Armstrong, who came to Verizon in 2015 when it acquired AOL and helped steer its purchase of Yahoo two years later, had tried to combine the two internet companies to challenge Google and Facebook Inc. in digital advertising. But those efforts so far have failed to generate much growth or make the unit, called Oath, more than a side note in the wireless giant’s earnings."

Everyone (including Verizon) tends to forget that Verizon usually fails when it wanders outside of its core competencies (read: running networks and lobbying to kill consumer protections and hinder competitive threats). From the company's arguably terrible VCAST services to its failed app store, Verizon has long engaged in "me too" efforts that don't last because they're simply not good. And they're generally not good because, as a government-pampered telecom monopoly, Verizon simply isn't good at innovation, creativity, competition, disruption pr actually listening to your users. They're alien concepts to most Verizon executives.

The company's failed streaming partnership with RedBox was another such example, and who can forget the company's attempt to launch a news website dubbed Sugarstring that collapsed in embarrassment after critics pointed out Verizon tried to ban writers from talking about net neutrality or surveillance.

Ironically though, part of the reason given for Verizon's problems getting Oath off the ground (at least according to the Wall Street Journal's sources) is that the company wasn't willing to be snoopy enough:

"Verizon and Oath executives, however, have disagreed over what some employees within the digital ad unit see as an overly conservative approach to using wireless subscriber data to boost Oath’s advertising revenue, people familiar with those discussions say.

Senior executives within Verizon are wary of potentially alienating lucrative wireless customers in the name of adding incremental advertising revenue, these people said. Oath contributed less than $4 billion in revenue during the first half of the year, compared with the wireless business’s $44 billion.

Verizon agreed to share with Oath anonymous information on subscribers’ age, gender, phone language, and data plan size, for example. But these people say the carrier refused to share information on the apps customers used and their web browsing activity unless users explicitly opted in.

Verizon, you'll recall, was one of the key players responsible for killing FCC broadband privacy rules last year. It also faced a major privacy scandal after it was found the company was covertly modifying user wireless packets to track users around the internet without telling them or providing working opt out tools. It took security researchers two years to even discover this was happening, and another six months of public shaming before Verizon made it possible to opt out.

Gun shy from that experience, and wary of courting additional scandal as it rushed to kill consumer oversight (both on the national and state level), Verizon subsequently made Oath's snoopiest systems opt in. And the result pretty clearly highlights why ISPs and marketing folks hate the entire opt in paradigm:

"Given the choice, most of Verizon's 116.5 million wireless subscribers decided not to take the deal. Just 10 million of them have opted into the data-sharing program, known as Verizon Selects, according to the Journal."

Again, it's pretty ironic that Verizon only went the opt in route because it was wary of courting additional scandal after it was caught spying on all of its wireless users without its permission. But it really also can't be over-stated at how terrible government-pampered monopolies are at actually building innovative and competitive products. You'd think that eventually, Verizon would realize its best bet lies in doing what it's good at, be it running wireless networks, or lobbying the government to screw over competitors and consumers.

Filed Under: advertising, internet, portals, tim armstrong
Companies: aol, oath, verizon, yahoo

Verizon's Oath Will Still Scan Your E-mail For Advertising Purposes Because Hey, It's Verizon

from the Verizon-gonna-Verizon dept

While all major webmail companies have veered away from the idea of automatically scanning private e-mails in a bid to monetize the content for behavioral advertising due to public backlash, that's simply not how Verizon rolls. According to a deep dive over at the Wall Street Journal (watch out for the paywall, here's a Verizon-owned Techcrunch alternative), Verizon and its Oath subsidiary now offer the country's only major webmail service that still thinks this practice is a good idea:

"Yahoo’s owner, the Oath unit of Verizon Communications, has been pitching a service to advertisers that analyzes more than 200 million Yahoo Mail inboxes and the rich user data they contain, searching for clues about what products those users might buy, said people who have attended Oath’s presentations as well as current and former employees of the company."

After backlash, Google ended its own practice of auto-monetizing e-mail content for behavioral ads last year, acknowledging that the practice doesn't exactly instill trust in your customers (e-mails are still automatically scanned as part of the company's "Smart Compose" feature, but content is no longer monetized). Apple has never scanned subscriber e-mails for this purpose, and Microsoft told Techcrunch this week that the company does “not use email content for ad targeting in any way, anywhere in Microsoft." The shift has been part of an effort to compete on privacy, which is an idea that should be encouraged.

Coming from the telecom sector, Verizon's not quite as familiar with this whole competition thing. In comments to the Journal, Oath's vice president of data, measurements and insights provided a very Verizon-esque response, suggesting the scanning was a public benefit to users eager to see more relevant ads:

"Mr. Sharp said that being served ads is part of the trade-off users make in exchange for free online services, and that Yahoo’s research shows they prefer ads that are relevant to them.

"Email is an expensive system,” Mr. Sharp said. "I think it’s reasonable and ethical to expect the value exchange, if you’ve got this mail service and there is advertising going on."

Yes, so ethical.

On the plus side, Verizon's e-mail scanning doesn't include health and medical information, though in the wild west of consumer privacy oversight that is the United States, you'd have a hard time confirming that this or other information (like financial data) isn't being exploited. After all, Verizon doesn't exactly have a great track record about being candid about this sort of thing. That said, it looks like even before Verizon came on board Yahoo's e-mail scanning and monetization system went notably further than Google's ever did:

"Initially, Yahoo mined users’ emails in part to discover products they bought through receipts from e-commerce companies such as Amazon.com Inc., people familiar with the practice said. Yahoo salespeople told potential advertisers that about one-third of Yahoo Mail users were active Amazon customers, one of the people said. In 2015, Amazon stopped including full itemized receipts in the emails it sends customers, partly because the company didn’t want Yahoo and others gathering that data for their own use, someone familiar with the matter said."

The problem is that while Verizon has hungrily eyed Silicon Valley giants' ad revenues for years, its effort to pivot into the ad sector isn't going so well. The company's Go90 video platform, purported to be the cornerstone of Verizon's Millennial-focused video ad ambitions, recently imploded after a fairly severe lack of public interest. And while Oath may ultimately prove to be a powerhouse in advertising, refusing to bend to competitive trends and consumer concerns by scanning the e-mails of millions of subscribers for an extra buck isn't a great way to build a trustworthy brand.

Of course, anybody surprised that Verizon would take the low road shouldn't be. After all, this is the same company that was caught a few years ago covertly modifying user wireless packets so it could track users around the internet without telling them. It took two years for security researchers to even notice it, and months more before Verizon could be bothered to offer a working opt out tool. And while the company was ultimately fined by the FCC for the practice, a bigger variant of that technology has long-since been implemented across Verizon's entire Oath (the combination of Yahoo and AOL) ad network.

Of course we haven't even gotten to Verizon's ultra-cozy relationship with the nation's intelligence apparatus yet, or the fact that giant ISPs routinely engage in pretty sleazy behavior to undermine pretty much any effort to shore up the nation's privacy standards, regardless of the quality of the effort. All while hoovering up and monetizing private user browsing and location data on a scale that pretty routinely makes the Facebook, Cambridge scandal look like child's play.

Granted if Verizon wants to undermine its own efforts to pivot into the online ad space that's its prerogative, but it might make sense for the traditionally myopic telecom giant to try and evolve on the consumer trust front as well. As an aside, if you're a Yahoo e-mail customer, you should be able to opt out here.

Filed Under: email, privacy, scanning, yahoo, yahoo mail
Companies: oath, verizon, yahoo