Yahoo and AOL sell the same stuff to the same advertisers and, once their sales organizations combine – likely after the deal closes around Q1 2017 – there will be plenty of layoffs.
Yahoo CEO Marisa Mayer said as much in Monday’s call to investors as the acquisition progressed. She said the company already has its lowest headcount since 2005, and “we’re going to continue along that path to make sure that we’ve got our resources really efficiently aligned.”
Doug Weaver, founder of sales consultancy Upstream Group, predicted “substantial” layoffs of both people and products.
Matt Prohaska, CEO and principal of Prohaska Consulting and an AOL vet, agreed: “There is going to be a great amount of fantastic talent on the market in the US.”
If layoffs are a near certainty, what’s informing them will be how AOL organizes its combined sales force and the way it will go to market collectively.
Smaller Sales Force, More To Sell
When Tim Armstrong joined AOL, he reorganized its sales force to mimic Google’s, going from regional to vertical. That proved more complex and problematic than originally anticipated. Given that experience, Armstrong will likely be more methodical and cautious this time around, a source said.
Because AOL and Yahoo have competed for years, their sales forces are similar, sources said. Both are organized by vertical. AOL historically had a much smaller sales force than Yahoo, though the gap has narrowed in recent years as Yahoo pared down its sales team.
AOL sells more programmatically than Yahoo, which favored a content-led approach over an ad tech strategy. Yahoo even laid off programmatic-focused employees in the past few quarters, a source noted. AOL will have to take on the automation task for Yahoo post-acquisition. In the process, Yahoo’s sales force will likely get leaner as more inventory sells through programmatic channels.
Since AOL and Yahoo work with the same advertisers in many cases, they will end up with double the account reps. Seeking efficiencies there will winnow the overall sales force even more.
Prohaska expects that salespeople will handle fewer accounts, maybe 15 instead of 20. Given that those reps will now handle Yahoo and AOL, those accounts will spend more, but not necessarily double. Marketers may view AOL and Yahoo as duplicative and want to reduce budgets overall. “Any buyer after a merger will say, ‘There is only one of you. We want less,’” Weaver said. “The onus is on the organization to create new value for marketers and agencies to create some white space in the budget.”
Go-To-Market
One way Verizon-AOL-Yahoo might create that “white space” is to make their salespeople more services and tech-oriented, and less focused on selling IOs and media, sources said.
As Yahoo’s declining ad revenue quarter after quarter illustrated, the role of the media salesperson hustling after display advertising IOs is a shrinking business. Meanwhile, AOL grew by focusing on ad tech over the consumer side of the business.
If AOL-Yahoo shifts from selling media to tech and services, it could become a “combined marcom company,” Weaver said. Once sales reps shift focus to solving marketer problems, they can offer solutions on a spectrum from media to SaaS to services.
There’s one final piece that Armstrong will have to keep in mind as he brings Yahoo’s sales force into its fold: Verizon.
“I don’t think Verizon will be content to create a great digital media company with good ad profits,” Weaver said. “[Armstrong’s] got to be thinking about how to create value for the parent company.” That may inform the structure of the dual sales force and how it presents the combined AOL-Verizon-Yahoo product to the market.
Update: An AOL spokesperson responded to the article. “We are likely more than 6 months out from close. Any impacts to employees post-close would be pure speculation at this point.”
