Why Verizon Media says its closer to playing offense

One year into taking the reins at Verizon Media, chief executive Guru Gowrappan is already tired of playing defense, itching to move key properties like Yahoo and AOL forward.

It’s not hard to understand why. As the former global MD of Alibaba, Gowrappan had been only used to going in one direction — up — when he arrived last year at Verizon Media, at that time still called Oath.

“I was lucky enough when I was [at Alibaba], growing 40% year-on-year on a massive base. But we never stopped being hungry: we showed up every day as if we didn't win anything” he tells Campaign during an exclusive one-hour sit down interview in Singapore. “That's the mindset we need to have here. You're not playing defense, you're playing offense. But you're coming in like there is no tomorrow.”

Inspired by Alibaba’s mindset, but with a commerce-driven vision of his own, Gowrappan lays out why he feels Verizon Media’s brand portfolio — including Yahoo, AOL, HuffPost and TechCrunch — are about to turn a corner after more than a decade of frustration by leaders from Terry Semel to Carol Bartz and Marissa Mayer at Yahoo, and from Randy Falco to Tim Armstrong at AOL. These leaders pushed and pulled at their internet brands for years, through expansion but more often contraction, in a series of stymied attempts to somehow make them catch up to big rivals like Facebook and Google.

Even after Verizon Media’s abrupt rebranding from the always-questionable packaging as ‘Oath’, it’s hard to see how a company so weighed down by legacy can find a way to thrive after so many years of challenges. Even now, Verizon Media is still a company in decline. In January it laid off 7% of its workforce following a US$4.6 billion writedown by Verizon on its media business. It continues to sell non-core assets like Tumblr while posting a 2.9% drop in revenue year-on-year in Q2, its most recent quarter. 

Yet even this might be seen as a step forward compared to larger revenue drops in prior quarters.   Likewise, all of this year's tough ‘defensive’ decisions are what the company argues is a painful but necessary path to a longer-term vision.

Gowrappan’s first decision as CEO, for instance, to scrap the ‘Oath’ brand despite considerable money being poured into it, he argues, was a no-brainer. “I didn’t do any analysis on it,” he says.  “I'm not a CMO but I’ve [managed] enough products out there.” He wanted the Verizon name in the brand mainly because employees were having a hard time describing where they worked. But he also wanted the media group to be easily identified alongside any discussions Verizon’s other consumer and business divisions might be having with big brands like Johnson & Johnson, Pepsi and Coke. “The ROI on this has been insanely amazing,” he adds, ”so I’m proud of that.”

The clean-up

Don’t mistake Gowrappan for a gut-decision guy though. When he talks, Gowrappan exudes enthusiasm, but it spills out in a very organised, methodical way, with much of our discussion being sorted into various “pillars” and “buckets” — the latter an apt term for a guy who has spent the past year cleaning up and consolidating his content and ad offerings.

Another one of Gowrappan’s early calls was to purge his media properties of porn, since it didn’t fit with the business' strategy of being a premium content provider for brands. This decision, he says, was already made before Apple kicked Tumblr out of its app store last December over child pornography concerns, but led inevitably to him selling off Tumblr in June. That move now “makes our ad position much stronger” in terms of brand safety, he says.

Graphic: TechCrunch

The other big clean-up that has been underway over the past few years has been to consolidate Verizon Media's advertising offering, which includes 13 different ad platforms including DSPs and SSPs. While not headline-grabbing, the painstaking integration has been critical to simplify its offering and attract more ad dollars. Gowrappan feels the business has now passed the “critical mass stage” where only smaller integrations remain and he can now invest in innovation.

Among those innovations is Verizon Media’s new Gemini native ad program, its fastest-growing product now along with its new DSP which enables the business to sell native ads programmatically. It's also expanding into audio ads through products like Pandora, AR ads in advance of 5G, and is using its DSP to sell digital out-of-home through third party providers based on time, location, weather and local demographics.

The future is transactional

Yet it’s Verizon Media’s development of dynamic product ads (DPAs) — where data feeds can configure product ads to meet different stages in the sales funnel — that gets Gowrappan most animated. He wants to bring the publisher’s core strength in advertising much closer to the commerce sector.

“The ad business and transaction business is a blurry line because in many ways, you will see
advertiser spend move away from the core ad system to say, ‘Hey, I want this to be transactional,’”
Gowrappan says. “That's the core thesis of performance ads today.”

The Verizon Media revenue model is predominantly ad-based and will be for years to come. But Gowrappan is looking to diversify that with new nascent-stage subscription products like TechCrunch’s ‘Extra Crunch’ but more importantly, transactions (ie. shopping).

In this, he’s building off early foundations at Yahoo in Taiwan and Hong Kong, which have already built successful commerce platforms. In the case of Taiwan, Yahoo has been running a robust B2C and even eBay-style C2C model for the past 17 years. In fact, unlike other Yahoo properties, half of Taiwan’s revenue comes from commerce and half comes from advertising.

Asked if this model could one day extend globally, Gowrappan concedes he’s not ready to consider it. “I would love for it to be 50-50 in that model,” he says, but again points to the more likely scenario of ad revenues and ecommerce revenues becoming entwined as ads become more transactional.

Yet there’s no doubt Gowrappan is using Yahoo’s Asian ecommerce operations as a foundation for building Verizon Media’s future. To do this, he’s tasked Rose Tsou, Verizon Media’s head of international based in Taiwan, with heading up their growing ecommerce initiatives.

Rose Tsou, head of international, Verizon Media

In practical terms, it means Tsou is building Verizon Media’s very own end-to-end ecommerce platform fed by its own user data. This will allow its audience to buy products from thousands of retail partners like Amazon and Walmart, or directly from brands like Under Armour.

Closing the loop

Gowrappan believes Verizon Media already has the content and product services that its audience wants, along with advertising encouraging them to buy. But it hasn’t effectively closed the loop around purchase yet. And that’s what he wants to change.

“Guru took the vision, really believing we would be able to speed dial by taking the advertising [and connecting it to] the commerce platform, the product that only serves Taiwan,” Tsou tells Campaign. “We basically rebuilt it to make it into a platform that can power our entire company globally as a network.”

A key test happened this past July around Amazon Prime Day. “In the past, our company didn't really anchor on these shopping holidays and help users,” Tsou says. But this year, it made a concerted effort to use all of its content channels — from Yahoo Lifestyle and Sports to Engadget, HuffPost and AOL —to create content around shopping tips and recommendations that connected to its shopping site. The pilot project paid off; beating sales goal for the week in the first two days alone. “It just completely blew our mind,” say Tsou, who now has fresh ambitions for this upcoming Black Friday.

Yahoo Shopping service

One can imagine that the editors of Verizon Media websites may not relish the idea of being told to create sales-driven content, but no one is planning to turn Yahoo into a home shopping network just yet. Nor are they planning to take on the ecommerce giants.

“We are not building the next Amazon or Alibaba. That's not part of the vision, I want to be clear,” Gowrappan insists. Instead, he sees opportunity in the content Verizon already has. He explains that  when he looked at all the content it has across all its brands and channels, 60% of it involved some form of commercial intent.

Ecommerce in the mail

It’s also why Gowrappan gets so enthusiastic about the relaunch of Yahoo products and services, like the new Yahoo Mail service that was released just two weeks ago. Sure, he’s jazzed by its better rating than Gmail on the Android app store and by all the customisation it has built in to try to appeal to a younger generation.

Yahoo's relaunched mail service

But it’s Yahoo Mail’s old legacy that now, oddly enough, has the potential to become a strength, he argues. Over the years, many users (including this author) had given up Yahoo mail as a primary personal account in favour of Gmail, opting instead to use their secondary Yahoo accounts to sign up for commercial discounts and loyalty programs, letting it become a depository for receipts and offers.

“But that was great because every user gave us a signal saying, ‘I'm using this for commercial intent’," Gowrappan enthuses. “This is your one-on-one commerce inbox.” As Tsou further explains, when you open your inbox you’re actually checking your receipts, thinking about your next purchase. Yahoo can step in and foster your relationship with that retailer, telling you when there is a price drop so that you continue to check your mail. 

For years, leaders have tried to figure out whether brands like Yahoo and AOL were primarily about content or communication. Now, Tsou says she has a better idea of the answer.

“We're just simply serving a consumer's overall need,” she says. “So we were super excited when Guru came onboard and see...his vision of how we close the loop because then you really have the consumer first and foremost.”

For Gowrappan, turning Verizon Media more consumer-centric goes hand-in-hand with a shift in mindset towards becoming growth-oriented, like his days at Alibaba. 

“That's the big culture shift,” he says. “Every one of our 11,000 employees will have to start making an impact to play more offense rather than playing defense.”