Is Yahoo in the process of imploding?

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In a deal that one observer called “the saddest $5 billion deal in tech history,” Yahoo agree to sell itself to telecommunications giant Verizon. But a string of events is raising questions about what Verizon will be able to do with Yahoo’s assets if and when the deal closes.

The events:

  • Late last month, Yahoo revealed that was hacked in 2014 by a “state-sponsored actor,” exposing data for at least 500 million user accounts. This data included names, emails, passwords and telephone numbers. The hack may be one of the biggest of all time, and while Verizon says that it is committed to closing its acquisition of Yahoo, the company is investigating whether the hack had a “material impact,” a finding that could be used to renegotiate the acquisition price, perhaps by up to $1 billion according to some reports.
  • Then early this month, Reuters broke the news that in April 2015, Yahoo began spying on the incoming emails of hundreds of millions of its users for the FBI and NSA. According to former employees who spoke to Reuters, Yahoo CEO Marissa Mayer made the decision to comply with the request of the intelligence agencies, which led to the resignation of the company’s Chief Information Security Officer, Alex Stamos, who is now security chief at Facebook.
  • The hacking and spying news has, not surprisingly, encouraged some to delete their Yahoo accounts. But those who prefer to ease their transition to another email provider found that starting in October, Yahoo disabled its email forwarding functionality for unspecified reasons, sparking speculation that Yahoo was trying to make it as difficult as possible for users to leave.

Needless to say, it has been a bad several weeks for the fallen internet star. But with Verizon indicating that it still sees value in Yahoo’s assets and audience, and intending to complete its acquisition, albeit at a potentially reduced price, who cares?

Why it matters

Verizon’s big bank account will ensure that Yahoo lives on, in some form or another, but for perhaps the first time ever, Yahoo faces a severe crisis of confidence with users. The problem for Yahoo is that this is occurring at the worst time possible.

For the past several years, Yahoo’s attempts to innovate and revitalize its brand have largely not been successful. At best, Yahoo has been treading water, but the status quo still gave Yahoo a viable position in the market.

Today, with Yahoo set to change hands, there’s no clear leadership capable of adeptly handling the company’s crises, and if users abandon the company during the transition, there’s a real chance the properties Verizon coveted won’t be what they once were before it has the chance to fix the situation.

For marketers who still turn to Yahoo for its audience, that would be an unfortunate thing.

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