Verizon acquires Yahoo’s operating business for $4.8 billion

Yahoo Featured Image

Verizon has agreed to acquire Yahoo’s operating business in a $4.8 billion cash deal, sealing the fate of one of the internet’s pioneering giants.

Under the deal Verizon will amalgamate Yahoo’s search, email, video, mobile, digital and advertising assets with it’s AOL entity. Verizon acquired AOL in a $4.4 billion deal last year to enhance its programmatic offerings.

The current deal does not include Yahoo’s shares in the Alibaba Group Holdings, or its shares in Yahoo Japan. These assets, along with other minority investments will continue to be held by Yahoo under a new, yet to be announced name. This will become a registered, publicly traded investment company.

“Yahoo is a company that has changed the world, and will continue to do so through this combination with Verizon and AOL,” said Marissa Mayer, chief executive officer, Yahoo.

In an open letter to Yahoo fans, Mayer said the sale was not only an important step in Yahoo’s plan to free up shareholder value, but a great opportunity for it to build further distribution and accelerate its work in mobile, video, native advertising, and social.

“As one of the largest wireless and cable companies in the world, Verizon opens the door to extensive distribution opportunities. With more than 100 million wireless customers, a shared view of the importance of mobile and video ad tech, a deep content focus through AOL, Verizon brings clear synergies to the table,” she said.

Mayer added that Yahoo’s products and brand would be central to achieving Verizon’s ambitious goal of growing its global audience to 2 billion users and reaching $20 billion in revenue from its mobile-media business by 2020.

“Joining forces with AOL and Verizon will help us achieve tremendous scale on mobile. Imagine the distribution challenges we will solve, the scale we will achieve, the products we will build, and the advertisers we will reach now with Mavens – it’s incredibly compelling,” Mayer said.

Mavens (mobile, video, native and social) has been a core pillar of Yahoo’s revival strategy since it was launched in 2011. In 2015, Yahoo’s Mavens business was worth $1.6 billion of GAAP revenue.

Verizon is the United States’ biggest wireless telecommunications company and its acquisition of Yahoo demonstrates its intentions to push ahead into the mobile and Internet spaces. A Verizon-AOL-Yahoo union could in theory provide a third credible player in the online ad space behind Google and Facebook, as forecast by eMarketer in the graphic below.

eMarketer_Net_US_Digital_Ad_Revenues_by_Company_2014-2018_205487 (1) (1)

*Source: eMarketer

Yahoo claims it has a global audience of more than 1 billion monthly active users, including 600 million monthly active mobile users. Its email services globally have approximately 225 million monthly active users. AOL says its mobile advertising network also has a reach of roughly 600 million users. Combine this data with that of Verizon’s more than 100 million wireless subscribers and the company has an even stronger offering to take to advertisers.

From a content point of view, Yahoo’s popular news, finance and sports platforms will be added to AOL’s media assets, which include The Huffington Post and TechCrunch.

Yahoo will continue to operate independently pending regulatory approval of the deal, which is expected to be completed by early 2017. Marni Walden, EVP and president, product innovation and new businesses organization, Verizon, will lead the integration of the AOL-Yahoo business, although Mayer is expected to stay on until the transaction is finalized.

“Our mission at AOL is to build brands people love, and we will continue to invest in and grow them. Yahoo has been a long-time investor in premium content and created some of the most beloved consumer brands in key categories like sports, news and finance,” said Tim Armstrong, chief executive officer, AOL.

“We have enormous respect for what Yahoo has accomplished: this transaction is about unleashing Yahoo’s full potential, building upon our collective synergies, and strengthening and accelerating that growth. Combining Verizon, AOL and Yahoo will create a new powerful competitive rival in mobile media, and an open, scaled alternative offering for advertisers and publishers,” he said.

Yahoo was founded in 1994 by Stanford University students Jerry Yang and David Filo. During the ’90s it diversified from a search directory into a web portal incorporating email, search and real-time media.

*Featured image: Yahoo / Flickr

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