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Verizon’s Oath Revenue Drops 6.9% in Third Quarter Amid Exec Shuffle

Verizon’s Oath internet media businesses — anchored by Yahoo and AOL — lost steam in the third quarter of 2018.

For Q3, the telco reported Oath revenue of $1.8 billion, down 6.9% compared with the year-earlier quarter. Verizon said it expects Oath revenue to be “relatively flat in the near term” and that it does not expect to meet the previously set target of $10 billion in Oath sales by 2020.

The $10 billion revenue goal by 2020 had been set by Tim Armstrong, who exited as Oath’s CEO earlier this month. Now leading the unit is K. Guru Gowrappan, the former Alibaba Group exec who joined the company as Oath president and COO in April.

In announcing Q3 earnings, Verizon said Oath’s search and desktop traffic — the largest component of the division’s revenue — has continued to decline, offsetting growth in mobile usage and video consumption, including its partnership with the NFL to live-stream games on mobile. Oath’s management team is now focused on completing the integration of the legacy AOL and Yahoo advertising platforms by the end of 2018, CFO Matt Ellis said on Verizon’s earnings call Tuesday.

“The cost side of that business is being managed well,” Ellis said on the call. “We just need the revenue side of the business to achieve its potential, too — and then we’ll be happy with the business.”

The revenue decline at Oath is likely to increase speculation that Verizon will try to sell or spin off the division; company execs in recent months have denied they are considering divesting Oath. Ellis did not directly address the question on the earnings call but his comments signaled that Verizon is committed to Oath. Verizon paid around $10 billion to acquire AOL and Yahoo, once powerhouse internet brands, in 2015 and 2017, respectively.

Oath’s media and tech brands include TechCrunch, Engadget, AOL.com, HuffPost, Yahoo Sports, Yahoo Finance, RYOT, MAKERS, Tumblr, Build Studios, Yahoo Mail and Verizon Digital Media Services. In the past year, Verizon has offloaded a few Oath properties, including Flickr (acquired by SmugMug) and Moviefone (sold to MoviePass parent Helios & Matheson Analytics).

Overall, Verizon posted Q3 revenue of $32.6 billion, up 2.8%, and reported $1.19 in earnings per share (versus 89 cents in Q3 2017), topping Wall Street expectations on both fronts.

The company’s results were driven by Verizon Wireless, which had total revenue of $23.0 billion for Q3 (up 6.5%). Verizon reported 515,000 retail postpaid net additions in third-quarter 2018, including net phone additions of 295,000.

Wireline revenue of $7.4 billion was down 3.7% year over year. Total Fios revenue was $3.0 billion, up 1.6%, with a net gain of 54,000 Fios Internet connections and a loss of 63,000 Fios Video connections “impacted by ongoing shifts away from linear video offerings” — i.e., cord-cutting. Verizon expects to see continued pressure in its pay-TV business, and has seen an uptick in new customers who take broadband-only service, Ellis said.

Verizon touted its 5G wireless push: On Oct. 1, it became the first carrier to offer home broadband via 5G in Los Angeles, Sacramento, Houston and Indianapolis.

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