There was a time when Yahoo was the go-to search engine for the majority of internet users. Fast forward a couple of decades and the company is living in the shadow of Google, which currently enjoys a 67% share of the global search engine market. Nevertheless, it would seem Yahoo is still worth something to telecoms giant Verizon, which has announced it is to acquire the firm’s core internet business for $4.83 billion. That’s around £3.7 billion, to save you the trouble.
The deal, which doesn’t include the stake that Yahoo has in Chinese e-commerce giant Alibaba, is significantly lower than the $44 billion that Microsoft offered for Yahoo back in 2008, and a fraction of the $125 billion it was valued at during the dot-com boom. It also follows Verizon’s $4.4 billion acquisition of AOL – remember them? – in June 2015. Lowell McAdam, chairman and CEO of Verizon, said that rolling Yahoo and AOL together will help Verizon become a top global mobile media company. Yet, with Yahoo reporting a $440m loss in the second quarter of this year, how can Verizon hope to recoup the cash it has splashed on a seemingly ailing business?Well, despite Yahoo’s fall from grace in recent years, it still boasts a global audience of more than one billion monthly active users, thanks largely to a portfolio of online properties that include photo-sharing site Flickr and blogging platform Tumblr, which it acquired for $1.1 billion in 2013. Meanwhile, services such as Yahoo Mail, Yahoo News and Yahoo Sports continue to be incredibly popular in the United States, to the extent that Yahoo was the country’s third most visited site in February this year. Finally, Yahoo has a number of adtech (advertising technology) assets including Brightroll, Flurry and Gemini, all of which were cited in Verizon’s statement about the deal.
With AOL already counting TechCrunch and Huffington Post among its own properties, acquiring Yahoo will mean Verizon has even more content platforms on which to sell ads. And, given the amount of data it has amassed from its mobile customers, it should be able to target ads effectively, something that Yahoo has struggled with compared to market leaders Google and Facebook.
"Just over a year ago we acquired AOL to enhance our strategy of providing a cross-screen connection for consumers, creators and advertisers,” said McAdam. “The acquisition of Yahoo will put Verizon in a highly competitive position as a top global mobile media company, and help accelerate our revenue stream in digital advertising."
The acquisition of Yahoo will put Verizon in a highly competitive position as a top global mobile media company. Lowell McAdam, AOL
Marissa Meyer, CEO of Yahoo, added: “Yahoo is a company that has changed the world, and will continue to do so through this combination with Verizon and AOL. This transaction […] sets up a great opportunity for Yahoo to build further distribution and accelerate our work in mobile, video, native advertising and social.”
Meyer, who was named CEO in 2012, also confirmed that she would be staying with Yahoo following the acquisition. In an email to Yahoo staff, which she published online, she wrote: “I love Yahoo, and I believe in all of you. It’s important to me to see Yahoo into its next chapter."
Yahoo is a company that has changed the world, and will continue to do so through this combination with Verizon and AOL.
Marissa Meyer, Yahoo
Tim Armstrong, CEO of AOL, commented: "[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."
Compared to the $26.2 billion that Microsoft spent on LinkedIn last month, this might end up proving something of a steal for Verizon. But we wouldn’t want to bet on it just yet.