Oath, the newly formed holding company for the combined AOL and Yahoo business, will not compete with Google and Facebook in the digital ad space but instead look to find new ways of working with advertisers, according to its CEO Tim Armstrong.
Speaking at a press briefing held this morning (19 June) at the Cannes Lions Festival in France, Armstrong shared his vision for Oath, which will come to market in two stages.
Firstly it will bring all its assets and data together into one environment, which will involve consolidation from a brand standpoint. Oath then plans to introduce a “disruptive” way of including consumers in advertising to make it a two-way relationship with brands. This will happen in between six and 12 months.
“Our goal is not to directly compete with Google and Facebook. Our goal is to open up new relationships with consumers in a differentiated way,” he explained.
Plans to outpace the market
Oath may say it doesn’t want to compete with Facebook and Google but they are its main rivals as it goes after ad dollars. And it will face a tough time attracting marketing budgets. In the US, Google and Facebook account for more than third-quarters of total digital ad spend, according to the Interactive Advertising Bureau, and almost all the ad spend growth. While digital spend is increasing the main beneficiaries of that are Google and Facebook.
Nevertheless, many in the industry have spoken of the concerns over the digital duopoly and need for a third big player in the market. However, even there Oath faces competitiors including Snapchat and Twitter.
Armstrong said Oath has a revenue target of between $10bn and $20bn. By comparison Google owner Alphabet’s revenue hit more than $24bn in its most recent quarter alone (the vast majority of which is advertising) while Facebook had revenues of $26bn in 2016.
Armstrong said the combined business could get to $10bn organically by growing at market rates, but admits that $20bn is “much harder to get to”. He described it as an “aspirational number”.
He said the $20bn was built off of the market statistics of these industries – how big they are, how fast they’re growing and what the likely consumer adoption is. The whole model works on it reaching two billion consumers though.
“Without those two billion consumers the rest of the numbers don’t materialise,” he added.
If the business can grow at 15%, it could organically reach the lower end of the target but he said it must do more if it wants to surpass market growth rates which comes from product development.
“You see what happened even in the last week with Amazon buying Whole Foods in the United States – the global business of commerce and marketing is in an accelerated period right now.
“For us our challenge is that we have to do more than meet the market growth rates. We have to be able to try and take share from the market overall and that is going to require us having an absolute product development lifecycle and launch that specifically allows us to take market share. We’re in a tail wind industry where money is coming into the industry but our engines need to fly faster than the tailwind.”
He therefore believes there is going to be “a lot more pressure” on Oath to focus on product and technology development in order to outpace competition.
“You’re going to see a lot of pressure from us, specifically targeting our consumer growth and improving brand marketing. Google is search. Facebook is social. We are going to be brands. A lot of people say ‘what does brands mean?’ and I say exactly, because that’s where the opportunity is. We want to invest in places that people don’t understand as well.”