Verizon’s Media Business Never Made Any Sense

Remember the ‘90s? Photo: Laura Cavanaugh/2015 Getty Images

On Tuesday, Verizon announced that it would be selling Yahoo and AOL. On the latest Pivot podcast, Kara Swisher and Scott Galloway discuss why it was never logical for the telecom giant to dabble in media and whether Yahoo was sold for less than it’s actually worth.

Kara Swisher: Verizon is selling Yahoo and AOL for $5 billion to a private-equity firm called Apollo. You know, Apollo, run by Leon Black, who got in some trouble with the Jeffrey Epstein situation. Several AOL people wrote me, saying, “It looks like you were right back then, when you called this a ridiculous sham.” And I got in a lot of trouble from Tim Armstrong and the Verizon CEO at the time. So what do we think about this?


Twice weekly, Scott Galloway and Kara Swisher host Pivot, a New York Magazine podcast about business, technology, and politics.

Galloway: So just some disclosures: I invested with Apollo and Ganett. I like Gannett, I like local newspapers and journalism and all that good stuff. I know those guys, and Tim Armstrong is one of my investors. Having said all of that — and by the way, I haven’t spoken to anybody regarding any of it — this never made any sense.

Swisher: No.

Galloway: TELCO’s adventures in media just haven’t worked. Verticalization is really powerful. But when your company is basically the mother of all tails wagging the dog … the tail and the dog here are these incredible recurring revenue firms called TELCOs that have amazing businesses. You look at 5G, which is super exciting.

And all these guys go vertical into content. But nobody buys AT&T or Verizon to get Yahoo or HBO. The companies just never really took seriously the notion of trying to integrate them and create a source of differentiation. And they’re all basically trying to sell them.

Swisher: Well, AT&T seems more committed, and Comcast has certainly worked out. They’ve owned NBC and the rest of it for a long time.

Galloway: That’s actually a fair point. They went vertical and maybe you could argue that’s working.

Swisher: But they’re sort of adjacent businesses. You know what I mean? They’re not necessarily synergies, but they do understand content. Comcast has some passing knowledge of content.

Galloway: I like the CMO of Verizon. I’ve known him for a while. And he asked me to speak at one of their big town halls with all the marketers. They did one of these pre-calls, where they see just how fucking crazy I’m going to be and if they should cancel.

And I said, “I’m going to say, Stop wasting time in media. You should just focus on 5G.” They came up with stuff we should market to disenfranchised communities. I’m like, “No, your entire marketing campaign should be three things: 5G, 5G, and 5G. Everyone’s excited about getting their shit done faster. And I said, “You should get out of media.” And then what do you know …

Swisher: You were like, “Stick to your knitting?” That’s what you said.

Galloway: And then the next day I get one of those, “we have decided to reformat the discussion and we’ll have you at a later time.” I get a lot of them.

Swisher:They wanted both of us. I had to turn that down too.

Galloway: Oh really?

Swisher: Yeah.

Galloway: But think about this — Yahoo is still an asset. I love Yahoo. Yahoo is still where I go for finance, and I think they do a great job. I like Yahoo Live. I think Yahoo is a really valuable property. It is the fourth most-trafficked site in the world. And it just went for $5 billion. And numbers three, two, and one are all worth a trillion dollars or more.

Swisher: And you get AOL too.

Galloway: What do people use AOL for? Is it dial-up if you live in Kansas or something?

Swisher: Hey, dial up is still a good business. I’ll tell you, if it didn’t die that quickly. Let me say, you and I both know Tim Armstrong very well, and I like Tim Armstrong. And he’s now into other things, direct to consumer stuff. He and I wrangled quite a bit over what he was doing with AOL. I thought it was crazy. I thought it was ridiculous. It was sort of like a duck-billed platypus. What’s that animal that you put together, all the animal parts together?

Galloway: It’s a platypus, yeah.

Swisher: Yeah, whatever. It just was crazy. I was like, “There’s no synergy here.” And then he kept… He was Huffington Post first and then AOL and Yahoo and then blah, blah, blah. It just went on and on and on. And at one point he even inquired about Recode. And I was like, “I just don’t even understand what you’re doing. I just don’t.” It made zero sense whatsoever. Both those properties were mismanaged for years. Right?

Both Yahoo and AOL had been at the forefront of the internet, no question. But when Verizon bought them, I wrote a lot of people “You’re working for the phone company. That’s great for you.”

Galloway: It made no sense. But Tim Armstrong did his job. Tim Armstrong sold a bag shit for a lot of money. And Marissa Mayer is arguably, I think one of the worst tech CEOs in the last 20 years. The wrst acquisition in technology — Yahoo purchased Tumblr within 60 days of when Instagram was purchased, but for a hundred million more. And then it was sold, I think for $3 million. They bought it for $1.1 billion and sold it for $3 million. I mean, that’s up there with a Bebo-style bad acquisition.

Swisher: It’s a mess. And what will Apollo do with it, since you know these guys?

Galloway: I don’t know what they plan to do with it. I will call — I’m not exaggerating — I will call Apollo this afternoon or tomorrow and I’ll say, they should merge with Gannett and try to focus on offline and online media. And I mean, Gannett right now is trading at a market cap of $600 million. I think between Yahoo and newspaper properties …

Swisher: God, you got to have someone special to run that disaster. That’d be tough.

Galloway: Yeah. you’re right. That would be tough. But I think Yahoo, at $5 billion, is a massively undervalued asset.

Swisher: Yeah. Agreed. I think you and I should run it right into a wall and then overpay ourselves.

Pivot is produced by Rebecca Sananes.

This transcript has been edited for length and clarity.

Verizon’s Media Business Never Made Any Sense