After buying AOL and Yahoo for nearly US$9 billion (NZ$13.1b), Verizon said Tuesday that it will write down the goodwill value of its media business by US$4.6 billion (NZ$6.7b), a massive drop the company attributes to stiff competition in the digital ad market and a failure to realize benefits from the combination of the two legacy companies.

After Verizon acquired Yahoo last year, the company unveiled Oath, a media and tech business where Yahoo and AOL would be housed, among other brands, to challenge Silicon Valley's dominant position in online advertising. But according to a Securities and Exchange Commission filing, Verizon said the value of Oath's goodwill - the intangible assets it purchased in the AOL and Yahoo acquisitions - has plummeted. Verizon had valued Oath's goodwill at $4.8 billion, the filing said, but after the write-down it sits at just $200 million.

"Verizon's Media business, branded Oath, has experienced increased competitive and market pressures throughout 2018 that have resulted in lower-than-expected revenues and earnings," Verizon said in the filing, adding that the merger of AOL and Yahoo under one company didn't turn out as expected. The company said it lowered its financial projections after completing a review of Oath's business prospects over the next five years.

Joanna O'Connell, a research analyst at Forrester Research, said that Oath had the makings of a valuable advertising platform, at least in theory, but failed to keep up with an increasingly competitive media landscape.

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On paper, Oath possessed key ingredients for success: its own media assets, advertising technology and a huge base of users tied to crucial data, she said. What's less certain is why those components never cohered into something more, she explained, perhaps owing to a lack of buy-in from leadership, organizational weakness, or the awkward marriage of AOL and Yahoo underneath Verizon. "The thing that is clear is they seemed to have failed."

The remarkable loss of value in Verizon's marquee brands also underscores the challenges of competing in the market for online advertising. Google and Facebook, the two dominant players, claim about 58 percent of digital ad market share in the United States, according to the research firm eMarketer. But further down the rankings, ad companies are being outmaneuvered by another tech giant, Amazon.com The e-commerce company will double its digital ad revenue this year, according to eMarketer projections, overtaking Oath and earning the number three position behind Google and Facebook, at 4.1 percent of market share. (Amazon chief executive Jeff Bezos owns The Washington Post.)

Former AOL chief executive Tim Armstrong announced the reorganizing of Verizon's media properties and the creation of Oath last spring. "Billion+ Consumers, 20+ Brands, Unstoppable Team," he said in a Twitter post, which was mocked at the time, with social media users ribbing Oath's name and what they took as the strained rebranding of legacy Web companies past their prime.

But to Verizon, Oath was the culmination of its new advertising strategy. Verizon bought AOL in part to take advantage of its ad technology, which could be put to work to sell increasingly personalized ads against Yahoo's content. At the time of the acquisition, Yahoo's portfolio of websites, including Yahoo Finance and Yahoo Sports, pulled in gargantuan amounts of online traffic. Nearly 200 million unique visitors flocked to Yahoo's websites last April, according to the analytics firm ComScore, besting every other Web destination except Facebook and Google.

This year, however, Oath could not withstand increased competition in the online ad business, Verizon said in its filing, and it expects those pressures to continue.

Verizon's write-down disclosure comes just days after it announced that 10,400 employees have taken voluntary buyouts to leave the company, as it focuses on the development of its 5G services. The number of departing employees amounted to nearly seven percent of Verizon's staff, according to the company.