Verizon signals its Yahoo and AOL divisions are almost worthless
nbcnews.com
nbcnews.com
https://arstechnica.com/information-technology/2018/12/veriz...
https://www.wsj.com/articles/verizons-severance-offer-goes-t...
After the first round of layoffs, there's a lot more stress, and the severance, almost without exception is a lot less generous for the second round of layoffs. Take the package; find a new job.
Surely this doesn’t mean that each employee who leaves gets to pocket an average of $200,000, right? But where else would this money go?
The investors, creditors, and the company's pension funds got a haircut.
It's really mostly an operating company, not a technology company.
Verizon plays the game by the rules and they won.
"The American people" is not a singular voting bloc. Those of us who don't vote for such things are well within our rights to get angry, as are those who did vote for the party but feel betrayed by it.
the American people voted for it overwhelmingly. Because Americans always vote for tax cuts.
The American people largely disapproved of the tax cut, and that has held steady in the year since its passage [1]. California soundly rejected the repeal of its gas tax. Americans don't always vote for tax cuts.
Verizon plays the game by the rules and they won.
Then let's change the rules? Defeatism can feel good, but it's unhelpful.
[1] https://news.gallup.com/poll/243611/disapprove-approve-2017-...
The media spoke negatively - almost to smear campaign levels - about the tax cut from the very beginning. Is it any wonder?
>and that has held steady in the year since its passage [1]
According to your source, support has increased. It’s still not popular among a majority, but post media smear campaign (mostly) support has gone up from 29% to 39%, and disapproval down from 56% to 46%. That’s pretty big.
[1] https://www.cnbc.com/2018/10/16/trumps-tax-cut-didnt-reduce-... [2] https://money.cnn.com/2018/07/10/investing/stock-buybacks-re... [3] https://www.taxpolicycenter.org/publications/effect-tcja-ind...
Yes, nearly every single media outlet spoke negatively about the tax cut while spending very little time speaking positively about it.
Take this example, one of many:
https://www.washingtonpost.com/news/wonk/wp/2018/03/30/the-r...
Entitled “The richest Americans get a $33,000 tax break under the GOP tax law. The poorest get $40.” What it fails to mention is the fact that the richest Americans are already paying the brunt of taxes, while the poorest are already barely paying any - as it should be. However, the headline paints a very biased picture.
See also the Wiki article on the Tax Act, which speaks to the media “assailing” the Tax Act, and provides examples. See this article
http://www.crfb.org/press-releases/house-passes-historic-deb...
Entitled “House Passes Historic Debt Increase”, while it may technically be correct, it’s also misleading and very biased. No mention of the near-$500-$1k a year tax break the average middle class American receives under the Act? Or the increased employment numbers?
Regarding complaints of adding to the deficit, note that aside from Fox, most media outlets - that had previously reamed W for his, rightfully so - payed little attention to the fact that Obama increased the deficit almost twice what Obama did.
It’s the picking and choosing that bothers me. Border walls and stricter immigration policy was endorsed by Dems until somewhat recently... until Trump endorsed them, now they’re the worst ideas ever. Budget deficits are fine when they’re the result of policies the Dems like... but now they’re horrendous.
I agree that the Tax Cut should have included bigger breaks for the lower income brackets, but they absolutely are still getting a break, and unemployment numbers are at record highs.
Obama didn't increase the deficit. Congress did, congress controls the budget, the buck stops with them. Obama had a friendly Congress for precisely two years and they basically did nothing worth remembering other than the Affordable Care Act which will be rolled back and push us back to the pre-existing conditions, even higher cost healthcare the at predated it, because Congress won't allow Medicare to use competitive drug pricing.
The reason the debt went up is because we were in a recession, fighting wars, and cut taxes. Of course the debt went up. You always need to spend governmental money to pull a country out of a recession, the government is the only one with enough money to do so. Same thing prior to capitalism. Cities that flourish have strong governmental spending. What we need to do is actually raise taxes and pay for what we've already spent. There's no amount of cutting taxes that will make us reduce the debt. I personally prefer the balanced-budget requirements, i.e. you can't spend money unless you say exactly where it's going to come from beforehand. I also wish that there were more studies spent on efficacy of money spent against the purpose and this was published regularly by the CBO.
As for the border wall, it's a terrible idea. No one is against border security, however border walls are a relatively terrible idea in most places due to costs, land rights, water rights, etc. It would be far more effective to spend money on more agents and automated drones to assist border control. Add to that we don't have a wall at the border with Canada so the idea of only protecting the Southern border comes across as silly since most people who are here illegally simply overstay their visas. If someone really wants to get into the US, it's trivially easy through numerous locations.
What about their customers?
> Profit maximization is a basic tenet of capitalism.
Sure, then lets eliminate tax cuts for 'Profit maximization' based corporations and increase their taxes to help the people of this country.
I like the fact I live in a Democratic country, the fact that it runs on capitalism, not so much.
Since there is such a “shortage” of engineering talent (to hear the H1 advocates tell it,) those laid off people should have no trouble finding a job with a profitable company.
Now, it may well be perfectly legal to render the site completely unusable if you don't want the default (I'll let others argue that out) but... it's meant my personal use of these sites has dropped to zero. I literally go "Oh, OATH, never mind."
I might not be in the majority, but it sounds like they could use all the visitors they can get.
One unintended positive effect of GDPR, much like “turn off your adblocker or no content!” modals, has been to deter me from reading pages that, by and large, would have been a needless timesuck anyhow.
Same here. But then I also started skipping Medium links for their obnoxious 'let's make it official' sheets.
And as far as I understand, Oath is indeed not compliant with the GDPR, because the default action should be to not permit tracking (opt-in rather than opt-out). But IANAL.
It would be nice if link aggregation sites such as Hackernews or lobste.rs provided a flag to indicate whether a linked page can be read immediately or requires clicking through overlays of any kind, so that those of us who are not interested in that crap can just skip those links.
It would be nice if the web could just return to being hyperlinks between pages of text. Just don't track by default.
That might have been possible if we had continued using gopher :).
Does of course raise the question of why did Verizon pay anything for Yahoo but those are the tough questions Verizon’s executive team will need to answer for its shareholders.
Even after Yahoo! was spun out and the old corp was turned into AltBaba with only the BABA and Yahoo Japan holding left over it still traded at a discount to the value of it's actual holdings for this reason
Matt Levine kinda explains that part here:
https://www.bloomberg.com/opinion/articles/2018-06-08/old-ya...
Second part also: investors didn't trust YHOO management not to keep plunging good money after poorly invested money into more bad ideas - that also had a negative value, until the sale was announced and it didn't
edit: should also mention that Verizon are incentivized to write-down the value of both Yahoo and AOL here for a host of reasons - one of which is to reduce their tax bill. They probably /s are both worth a lot more than zero if being sold on the open market today
That's not how it works.
First, when a company's price-to-book ratio (the ratio of the company's share price to its book value per share) you can't take semi-arbitrary parts of the company's book value that add up to its market cap and declare the rest to be worth negative value. The situation arises because investors value the overall package less than someone who would like to own the assets outright.
Second, static piles of money will always be discounted by the market, particularly when they are mostly illiquid (as the Alibaba stake was). If the Alibaba stake had been separated out into a publicly-traded company by itself it would have traded well below its book value, because what rational investor wants to buy into a static pile of money?
I'll happily pay you however much you let me buy of a static pile of money for under the dollar amount of the pile, as long as the difference covers transfer fees. I'm pretty sure I wouldn't be the only one either.
This to say that when you state "that's not how it works", that's your analysis of the market, and you're free to rationalize how you think the market arrived at a current valuation, but other people will rationalize it differently. That's the whole reason why different investment strategies exist.
The nominal interest depends entirely on their faith in you and their estimates of future value.
There are various standard scams associated with games like this.
To keep it simple it's true that stock isn't money. But it's unbelievably easy to turn stock into money without necessarily having to sell it, or without being forced to modify the market rate with a giant stock dump.
The scams, as far as I can see, relate to the bank overvaluing the collateral or its liquidity, which is rightly the bank's fault, so it's reasonable that they bear the risk and get screwed. Unless it's a pure scam though, the lendee gets screwed too, by losing the collateral (and a lot more of it than necessary, if it's liquidated at short term lows).
[1] Unless the bank is playing the bubble game of collecting interest on the loan and not caring if the loan defaults or the underlying asset drops below the outstanding loan amount (could be either because they anticipate a bailout, or they already got fat salaries and bonuses and don't care if bank goes down in flames, but most of that kind of fiduciary irresponsibility is punished by regulations).
Which helps with this analysis as risk and time value of money etc reduce the value of a future pile of money. Buying into a stack pile of money you get tomorrow is worth far more than that same pile at some potential point in the future.
The money probably has outstanding tax liabilities (the Ali stake does), there may be other outstanding claims or legal restrictions on the use or divestment of the money, you have no say in how the money is used for investment or other purposes and no control over when or how the money is divested if ever.
Compare that to just keeping your own money in a savings account over which you have full control.
If I want to invest in Ali am I better off buying Ali shares myself, or buying a stake in a big pile of Ali shares I have no control over? It's not even an actively managed fund so you're not even getting that benefit.
Why? What does that gain you? You lose the use of the money you put in to buying the asset. You have no access to the money backing up the asset. That underlying asset might be going up or down in value, but none of that value change is being paid out to you.
> This to say that when you state "that's not how it works", that's your analysis of the market, and you're free to rationalize how you think the market arrived at a current valuation, but other people will rationalize it differently. That's the whole reason why different investment strategies exist.
Most investment strategies are shit in the long run, particularly those that are rationalized (i.e., superficially reasonable and valid, but actually supported by unconscious or specious reasoning). Discounting the value of an asset you cannot directly purchase and control is not one of them.
Good question. But let's take it a step further, which Wall Street outfit advised on and brokered that deal?
Of course the Verizon brass is ultimately responsible, but they weren't the only one who got it wrong. That said, I bet the WS firm that got it wrong still made out pretty well.
Goodwill (https://en.wikipedia.org/wiki/Goodwill_(accounting)) is the amount you paid for an acquistion, above and beyond the fair-market book value of a company.
Just per the article, AOL was $4.4B and Yahoo was $4.5B. Now, just ignoring any tuck in acquisitions that Oath has made as a unit (presumably goodwill being rolled up under it), you have $9.9B in acquisition costs with $4.8B in goodwill initially.
They are just saying they overpaid by $4.6B, and it's now worth $5.3B. If any CPAs are out there would love to know if my interpretation is right.
They are saying the value the brand adds to the underlying assets (goodwill) is really 4% of what they originally paid. The brand is relatively worthless.
edit: https://www.economist.com/business/2014/08/30/untouchable-in... - we're both right. Brand is on balance sheet as an intangible, but it doesn't reflect all brand value (and in an acquistition that's frequently reflected in the goodwill). I know that goodwill can reflect expected cross-selling synergy, expense reduction from redundancy layoffs, less pricing pressure, etc, also.
Let's say you're buying a trucking firm. Their only assets are 10 trucks worth a total of one million and they have no liabilities. The book value of that firm is one million. Let's say that the firm is one of the few with the specialized knowledge required to ship radioactive waste. They make quite a bit of money so you buy them for their market value of 10 million.
If we look at your books, it looks like you just spent 10 million for 1 million of assets. In other words, your company just lost 9 million dollars. Obviously that doesn't make sense. The accounting way out of that is to add in 9 million dollars of goodwill. The transaction is then 10 million for 1 million worth of trucks and 9 million worth of goodwill. So now you're paying 10 million for 10 million worth of assets and don't show a loss on your books.
Say a year later due to some safety issues you lose your license to ship radioactive waste. Now the trucking company is just a regular ole trucking company and worth a lot less. So you write down the value of the goodwill so your books reflect reality and use the write down to offset profits to lower your taxes.
(Most of their expenditures to produce software are expensed rather than capitalized.)
On the lower end of the scale, liabilities of SaaS companies exceed assets (as measured formally for a balance sheet) quite frequently. The shareholder equity for both of my businesses was negative when I sold them.
PS - great explanation of goodwill!
I agree that goodwill is (depending on exact definition) essentially the expected value of a business in excess of its tangible assets.
Verizon paid $8.9B for AOL + Yahoo. Oath has ~$5B of assets, which sets a rough minimum for purchase price: that's what you'd pay for the remains if Oath gave up and liquidated, and it was presumably a fixed cost in Verizon's initial purchase. (Less whatever AOL and Yahoo have in post-acquisition asset gain, but I can't imagine it's enormous.)
Assessing Oath at $4.8B in goodwill + $5B in assets implied a modest gain in value (or perhaps more likely, tertiary acquisitions under the brand). Reassessing goodwill to $0.2B implies that Oath as a going concern is producing basically no value beyond what you'd get from selling off the computers, office space etc. Which seems pretty plausible, since it's hard to imagine e.g. Tumblr ad revenue even paying off its own operating costs.
I had no idea what this web nonsense even meant, but I was extremely excited to find out. Turned out to be a pretty good idea in the end.
No. AOL was AOL, and the World Wide Web was another entity that you accessed with a GEnie, Delphi, or some other service.
Eventually mail gateways were build so you could relay e-mail from one service to another. Then later came web browsing on AOL.
Nostalgia is a hell of a drug ;)
was aol even connected to the internet at that point?
For those of us who did not grow up on AOL, here's how the time when the hordes gained Usenet access was immortalized:
Trident layout engine: https://en.m.wikipedia.org/wiki/AOL_Explorer
It's sad because in the 90's, they were the "go to" place. I knew so many early internet users who had their home pages set to Yahoo.
They could have paid talent and they had a ton of traffic. You can basically build whatever from there.
They never had Google's attitude that "what helps the web helps us".
And it was easy to control _how_ and _where_ you wanted your site to appear in the index. It's naive to think something similar would survive endless spam nowadays, but damn, I liked and really miss it.
To be fair, it didn't even scale in the face of DMOZ (née GnuHoo), which was similarly structured and human curated, but Wikipedia to Yahoo’s Britannica.
Most support seems to be nostalgia. But if somehow Yahoo did buy Google or Facebook I doubt Yahoo would have been up to the task to make it as successful as they are now.
You are right though. They would not have been as successful.
The primary damage was psychological. Investors lost faith in technology so after 2000 tech companies scrambled to reinvent themselves as "not tech" companies.
Yahoo was one of the worst examples, hiring CEOs that tried to turn it into a media company. Yahoo's technology investment suffered and they had no technology strategy for too long.
Mozilla has a real vision, and Yahoo could have moved the vast internet properties under its control into conformity with Mozilla's vision in various ways, and given real legs to things like Persona, or the various other beautiful Mozilla Labs projects.
To me that's an ultimate what-if, and a missed opportunity for both companies.
Yahoo was so great in the 90's! It was hard finding things on the early Internet. What they were doing with directories and search seems primitive now, but it really ground breaking. I still remember the first time I discovered it. Probably late '94 (before it was called Yahoo) or '95...
Exactly. Yahoo had more organic pieces of a true social network than Google ever did. In addition to the ones you listed, there were their news properties, groups, fantasy sports, and later on, properties like Delicious, Flickr and Tumblr. They could have had something really interesting under good management (admittedly a huge caveat).
They had the pieces to a more plausible facebook competitor than Google ever did, and even Google's best potential seed of a social network, Google Reader, was mismanaged in a failure of strategic vision. In any case, I'm not among those who think Yahoo was doomed. They had the pieces to become something interesting.
You could even read your email over the phone way before smartphones were a thing.
All that lead gone to waste...
Yahoo turned down the option to buy early Google. They didn't see the value in search because it would take users away from their site. They wanted users to stay on their site and participate in discussions and such.
But in the 90s they had no real competition and some of their products were actually pretty good and convenient given the limitations of the time.
Everyday I woke up with a phone call from yahoo at my chosen time telling me how many unread emails I had, the weather for that day and what events my calendar had.
All went to waste...
Yahoo was "the Internet's homepage" (before Reddit co-opted that), and was, when keyword-based search was kind of sucky and already getting gamed (HTML "keyword" headers, if anyone remembers those, Lycos, HotBot, Alta Vista, Ask Jeeves, ...) a pretty good way to find things. The Yahoo directory itself (Yang's Hierarchical Officious Oracle or Yet Another Hierarchical Officious Oracle) was carried forward for a while as DMOZ (since killed), and has certain similarities to Wikipedia, though that focuses on knowledge and not necessarily webpages. To that extent, I find Wikipedia more useful today, because it tells me what I'm looking to find out, rather than directing me to some page, which may, or quite probably, may not, have what I'm looking for. And in either case, almost certainly assaults my senses.
Yahoo also served as an information hub. Before there was Google News, there was Yahoo News, Yahoo Weather, Yahoo Finance, Yahoo Maps (I think). One of the first online web-based email services (and still a large, though declining, share of the market, along with Aol and Hotmail, along with a few other relics).
The consumerisation of Yahoo was already turning me off by the late 1990s, and I remember running across the first print magazine pushing that side of the company in San Francisco in the late 1990s / early 2000s, and deciding that the company had jumped the shark so far as I was concerned. I've always lead the crowd....
(I'm not bragging. I'm saying that if I predict something, give it another 20 years. Though I occasionally get closer the mark.)
At the time, there wasn't anything on the Open Web that was close.
There were entirely closed portals, most especially AOL, and other early online services (Prodigy, CompuServ, etc.). But the idea of one place you could go for all of that, no. Yahoo started the Portal Wars. (Best rejoinder ever: "My ass is a portal".
One version of that (from 1999, and, of course, /.), here:
https://linux.slashdot.org/story/99/03/04/1128220/redhats-ne...
So, at the time, Yahoo was huge. And the Internet was tremendously smaller than today -- about 100x fewer people online then than now -- call it 30 million rather than 3 billion users. Today, a social site with "only" 30 million MUA is considered a failure or minor player.
I used to use movies.yahoo.com as my hub for trailers and showtimes, even in the era of top Google. Now, the first thing you see is a mishmash of entertainment news, presented in a boring vertical format. There's no prioritization of the biggest movies being released, no big horizontal banners sliding with the newest movie releases being shown off, etc. It's boring, innavigable word vomit on a white background. I can't even fathom why the decision was made to make it so boring and useless. How could this have possibly made Yahoo better?
good times
The primary business that Yahoo is in is really content production. And content production just isn't as high margin as search.
http://brucefwebster.com/2008/04/11/the-wetware-crisis-the-d...
Yahoo had everything from an IM service, mail, hosting, groups, fantasy sports stuff, Geocities once the defacto free site host of the internet, their own web browser at one point iirc and loads more.
Popularity is more closely related to operating cost than profit or even revenue.
Popularity is fine if you've effectively monetized your visitors, otherwise it's just how fast you are burning through money serving them.
1. Acquire lots of users
2.
3. Profit
Can be a viable model, but only if you fill in Step 2 right.
https://blog.mozilla.org/blog/2017/12/05/mozilla-files-cross...
I smell financial wizardary.
In this case they have spend $5B only to write if off the following year. Something else is going on. I don't think these guys are so stupid.
Stock is something a company can create. Cash is something it needs to acquire.
Stock swap, write-off, devalued stock. No net cash position change. Asset-liability shift may be worth the market-cap writedown.
”That doesn't mean Oath is actually worth only $200 million in cash — Oath said it still has about $5 billion of real assets remaining.”
Oath’s goodwill was dramatically overvalued, but the fact that it has $5 billion in real assets makes it difficult to describe the “almost worthless” label used in this article’s title as anything but clickbait.
A friend of mine used to work at Yahoo in the in the news department.
She said it was one of the best teams she'd ever worked in (they were supportive with a spurious but difficult legal issue she faced ) and she pushed out some really great reporting during her one year contract.
It might be worthless to Verizon, but many people enjoyed working there and I know her articles got read because a few had a national impact.
Of course that is just a microcosm of the overall company, but it's sad that a friendly workplace gets deemed 'worthless' when so many abusive workplaces are overvalued.
They aren't making any money. They aren't a good investment to anyone, Verizon or otherwise.
The investor's make money off of Yahoo (or lose) because they had enough money lying around to buy a stock or mutual fund.
In fact workers can form and grow a company alone, but passive investors can't.
Not surprising? Can't remember the last time Verizon launched a truly innovative initiative of any kind.
And could this might just be a tax avoidance move?
AdapTV and Brightroll were like 90% fraud last time I looked at it.
Yahoo!'s sponsored search is also.... particularly special.
What makes you think that? Oath is Yahoo.
Brightroll
Parent organizations: Yahoo! (2014–2017), Oath (2017–)
Has it not dawned on the Baby Bells that maybe content creation is an expensive endeavour and its maybe not worth the investment?
"Yahoo Music was the number one online music site in terms of audience reach and total time spent in March 2007."
https://en.m.wikipedia.org/wiki/Yahoo!_Music
Unlimited streaming for $9/mo: https://en.m.wikipedia.org/wiki/Yahoo!_Music_Unlimited
Sort of hard to guess how much blame anyone at Yahoo actually bears for that decline, though. I notice 2007 was also the year Apple released the iPhone and started selling DRM-free music via iTunes, which has to have been something of an outside-context problem for a music web service.
In general, it looks a bit like they suffered the same fate as the earliest smartphone designers. It was a worthwhile product, but practical constraints rewarded a restricted version (Palm Pilots, wholly local music storage), and the business fell out of use before there was enough space to provide a fancier version (iPhones, Spotify) of the same offering.
Either way, I'm actually happy with this outcome, because for one Yahoo was destroyed due to its data breach and allowing the NSA to put backdoors on its servers, and second Verizon said it's getting out of the content business.
That can only be a positive for all Verizon customers, because Verizon being involved in the content business only meant more and more spying on its customers' web behavior.
Hopefully we'll see more such cases where the value of companies suffering major data breaches is reduced to almost nothing. Maybe that will change the industry's thinking about data security and data collection a little bit.
I've also long argued that governments as well as corporations should see data collection as a liability. So that when a data breach happens and everyone's data is exposed, they should be fined into near-bankruptcy. However, if they minimize data collection and they encrypt the data they do gather in such a way that even the companies themselves can't access it (end-to-end encryption, fully homomorphic encryption, etc), then they should be immune from such fines. I figure that would swing the pendulum towards companies minimizing the reckless "all they can get" collection of users' data.
Right now if data leaks, maybe you get some emails and user data which is cool but ultimately useless beyond spam value or for identity fraud, or perhaps for hacking some other financial accounts that may be of some value, but also adds more risk.
But if you know a company could be utterly destroyed with fines, you can open up a huge short position on the company and then publicize the breach somewhere and wait for the stock to drop to zero.
Or maybe you’re a startup and want to eliminate some competitors. Pay off some hackers in bitcoin to attack and breach their servers and watch them go under.
Better to just leave things the way they are now.
The equivalent argument is that if one branch of a bank gets robbed they should be fined to near bankruptcy, which would almost certainly cause a drop in shareholder value.
No, not really.
That seems really inefficient.
Not that these were great companies but you'd hope someone(s) could take a better run at things than Verizon.
I guess it makes for an appealing lede with the big number of dollars, but it's meaningless. Focus on the real evidence of failure, not the balance sheet shenanigans.
Not to ignore your point. IMO having been so thoroughly pwnd by various crackers over the years and with barely an apology to its users Yahoo Mail's surprisingly worth more than a liability, but less than a slap in the face with a fish.
Verizon insanely overpays for a pair of companies who are in complete decline
Verizon rebrands these companies with one the worst sounding names in business - OATH
Verizon declares these acquisitions worthless
This expensive mistake will likely be offset by employee layoffs and new fees levied on existing customers. What a toxic company.
Possibly incentive for Amazon to make itself its own best adverts option.
Sure both Yahoo and AOL must have talented people working there, but that's kinda useless if you don't make them work on profitable projects. Finding the profitable ideas is the hard part.
I'm amazed that they haven't had massive layoffs. They're both popular enough to the point where they could turn a profit with a significant shift in how they operate.