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Verizon Media CEO Reveals His Plan For Reviving Struggling Online Business

Guru Gowrappan has spent the seven months charting a new course for Verizon Media, the struggling digital media business owned by telecom giant Verizon.

The unit is a mashup of two dinosaur Internet companies: AOL, which Verizon acquired in 2015 for $4.4 billion, and Yahoo, which cost $4.5 billion in 2017. Verizon’s goal was to expand beyond its telecommunications roots and into the digital media space, where it could diversify its revenue.

But the strategy quickly turned into a nightmare when profits failed to live up to expectations.

“The plan before I took over was a little bit all over the place because we were not that focused,” Gowrappan said. “We didn’t drive a lot of execution.”

He took the top job in the unit from Tim Armstrong, the former AOL CEO who had championed the merger of the two Internet brands, which included HuffPost and Yahoo’s Web portal. Originally called Oath, the unit recast itself as Verizon Media.

Enter Gowrappan, who in April joined the company as Oath’s chief operating officer before being promoted to CEO. Gowrappan had previously served as the global managing director at the Alibaba Group and in various leadership roles at Yahoo.

Gowrappan’s tenure as Verizon Media’s CEO was followed by a couple of months of bad news. In December, Verizon wrote off $4.6 billion in value from its recently acquired online assets because of their poor performance followed shortly thereafter by an announcement that it planned to cut about 800 employees, or 7% of its staff.

On Tuesday, Verizon said Verizon Media generated $1.8 billion in revenue during the first quarter, down 7.2% from the same quarter last year. The company said declines in desktop advertising overshadowed growing in mobile and native advertising. During the fourth quarter of 2018, Verizon Media made $2.1 billion in revenue, down 5.8% from the prior year.

Gowrappan said Verizon Media now has a more focused strategy, and that its “declines are declining.”

In an interview with Fortune, he spoke about his plans to grow the media business, the company’s new products, and how it will compete against some of the larger tech giants. The following has been edited for length and clarity.

Fortune: What was your strategy when you took the CEO job at then Oath?

Gowrappan: One of the first things we did was rename Oath Verizon Media Group. The challenge was, culturally, we were acting as two different companies. When [Verizon CEO] Hans [Vestberg] and I spoke, it was a no brainer to call it Verizon Media.

Our core strategy is to build a member-centric ecosystem. That means when you go to Yahoo Finance, you should be able to trade, you should be able to see videos. You get to engage with the product, so it’s no longer a shallow touch and go. My vision, the next five years, is to get a third our revenue each from ads, subscriptions, and transactions.

What kinds of transactions do you envision?

Let’s say you’re watching the Dallas Mavs and want to buy a jersey while you’re watching. We want to integrate commerce more deeply.

Also, the ad model itself has become combined with transactions. That’s what Instagram does. It’s advertising and sponsorships, but in the end, it’s enticing you to come in and transact on the platform.

On subscriptions, we’ve launched two big subscription products. One is Finance Premium [users pay a monthly subscription for Yahoo Finance’s proprietary research, data sets, and financial tools]. We did a deal with Apple recently on TechCrunch called Extra Crunch, [a subscription service that offers readers deeper profiles, databases, and commentary]. We have at least two more premium products coming out in the next three months.

Where does AOL and Yahoo fit in your priorities?

AOL Mail is still big for us. It’s massive. We made a single backend for AOL and Yahoo. That’s how we optimized it. They had the highest revenue, Yahoo and AOL Mail, that they’ve ever had in the last five years.

You will see toward the tail end of this year that we will go out with more rebranding, bringing Yahoo and AOL back to life.

For whatever reason, when AOL and Yahoo got acquired, they were, ‘Hey, we should go get any type of ads.’ A lot of it was bad. We’re cleaning up a lot of that. You’ll lose some short-term revenue, but you’re building much deeper engagement.

Do you expect to cut more jobs or shut down any brands?

We’re done cutting. We want to get back into focusing on growing. What you’ll see more is incremental investments in core priorities. HuffPost is a great example. We exited a few markets there. It was not exiting HuffPost itself; it was bringing more focus to core markets.

We shut down a lot of test products. For example, we had a chat app called Squirrel. Then we shut down a Yahoo Finance micro-lending product, as well.

Which are the businesses that you consider to be the highest priority?

We’re investing heavily on the ad platform right now. Verizon Digital Media Services is an amazingly unique asset for us. The second one is really investing in the six “supers” (home, mail, finance, sports, news and entertainment).

How do you take on larger competitors like Google and Facebook?

Investment wise, we’re not sitting back and investing as a No. 3 player, we’re investing to get to No. 1 in areas where we are not. We have a big advantage on business to business customers. Verizon is big on B2B globally so we piggyback with them on ads.

What should we expect from Verizon Media In the next several years?

The biggest thing we’re investing in is 5G [the faster successor to 4G LTE mobile networks]. Every product is going to have an aspect of 5G. You’re going to have deeper integration of augmented reality and virtual reality.

We not just have front row seat and access to what is happening but we’re also building all of our apps, products, and content in that experience. So if you go to our Los Angeles office, we have the first 5G animation studio [Ryot Studios]. It’s brought down the cost of producing animation, and Ryot does a lot of AR content

Any final thoughts?

A lot of people ask me why you’d leave Alibaba and come here. Personally, I’m a mission-driven guy. I want to be in a position where I can impact billions of consumers not just from a consumer level but also have an impact on society.