I Still Can't Believe Verizon Spent $200 Million on go90

By Daniel B. Kline Markets Fool.com

Proprietary content can keep customers loyal.

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That's the logic behind Verizon's (NYSE: VZ) ill-fated go90 platform. The problem, and it's a big one, is that creating content people actually want presents major challenges. In addition, go90 launched at a time when consumers have an unprecedented amount of content to choose from.

Verizon, which spent $200 million on content for the service and another $80 million marketing it in 2016, according to Business Insider, also made the mistake of entering a market already owned by YouTube. go90 was an attempt to lure millennials, a generation particularly resistant to craven marketing efforts.

It was an attempt that was badly off base and failed quickly. go90 still exists, but it has been dramatically scaled back, with 155 full-time staff losing their jobs in January, Deadline reported.

Verizon hoped to lure young people in with go90. Image source: Getty Images.

Verizon won't admit failure

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When it blows hundreds of millions of dollars on an idea that never had any hopes of working, a company like Verizon won't admit it made a mistake. Instead, it releases a statementlike this one:

Our focus with go90 and our Verizon digital media efforts are to fulfill our strategy of leveraging Verizon content investments, enhancing user experience, and strengthening our advertising infrastructure. Fulfilling this strategy has resulted in some duplicative resources and has required organizational changes impacting 155 employees as we consolidate offices in Los Angeles, San Jose, and New York.

That's a whole lot of corporate gobbledygook to avoid saying what a terrible idea spending so much trying to create viral videos was. Of course, shareholders and the 155 who lost their job were probably delighted to hear that "these changes are not indicative to a change in our strategy."

go90 has become a lot like other unsuccessful online content platforms. It has a handful of familiar old shows and movies (Veronica Mars, Kung Fu Panda) and a ton of content nobody has ever heard of. That may be insulting to the cast of Dunk League or Betch!, butthese shows are obscure.

Why go big?

The biggest mistake Verizon made with go90 was attempting to launch it based on spending big. It would have made more sense to take a slower, more grassroots approach. That's how Netflix (NASDAQ: NFLX), Hulu, and Amazon.comentered the content game.

Verizon instead had the hubris to assume that it could throw money at the problem and millennials would be easy to lure in. That would seem to be the case given the enormous volume of highly watched yet awful content on YouTube, but that platform had the advantage of being first. At best, go90 was a me-too player in an already crowded field, and in reality it was never really a player at all.

In addition, breaking into episodic programming and viral videos requires both talent and luck. All of the aforementioned platforms, as well as the broadcast networks and cable channels that produce original content, sometimes fail with shows that deserve an audience. There was no reason to believe that Verizon -- even a deep-pocketed Verizon -- would have quick and easy success in the content space.

Let's hope Verizon learned a lesson

It's easy to see why Verizon wants to have a draw beyond a high-priced wireless service. The advantage its network once had over lower-cost rivals Sprint and T-Mobile has shrunk, taking away what has been its key marketing pitch.

Owning content that people want to watch would be that draw. The problem is that creating content that keeps people paying for a service that costs more than its rivals isn't easy. HBO, Netflix, and very few others have been able to achieve that. Maybe in time go90 would have gotten there, but it doesn't seem likely.

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Daniel Kline has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Amazon, Netflix, and Verizon Communications. The Motley Fool recommends T-Mobile US. The Motley Fool has a disclosure policy.