The long, slow march to acquisition is finally over for Yahoo, as an auction started in February has concluded with Verizon coming out on top. It’s been confirmed today that Verizon will pay $4.8 billion for Yahoo’s internet business, which includes their content, advertising platform, and previous acquisitions like Tumblr, in a deal that sees an end to Yahoo’s long decline. Yahoo’s investments, including its large stake in Alibaba, will remain part of a separate holding company that will be renamed once the sale is finalized.
According to a press release from Verizon, “Yahoo will be integrated with AOL under Marni Walden, EVP and President of the Product Innovation and New Businesses organization at Verizon.” That’s in reference to Verizon’s acquisition of AOL for $4.4 billion, which was announced in May 2015. It shows how much things have changed — two giants of the ’90s internet are being merged, and neither one is independent. Neither AOL nor Yahoo could stay competitive enough in advertising revenue following the rise of Google and, more recently, Facebook, despite Yahoo CEO Marissa Mayer’s frequent attempts at reversing the company’s fortunes through splashy acquisitions, aggressive content moves, and big-name talent hires.
While Yahoo has foundered as an independent business, there’s still value to be found in its assets. Yahoo still has over one billion users and still has strong media products, especially in sports and finance. And, although their advertising business, much of which still involves banner ads that have sunk in value in recent years, was not enough to sustain their business, Verizon sees it as a useful addition to their growing advertising platform, something that started with the AOL acquisition.
It’s a deal Yahoo had to make in the present, but it’s difficult to see it as anything other than a disaster otherwise. As a Bloomberg report points out, Yahoo turned down a $45 billion buyout offer from Microsoft in 2008. Yahoo’s value has only plummeted since then — before the Verizon acquisition, Yahoo’s value was put at about $38 billion, including the investments that will remain in the holding company. Those investments are valued at over $40 billion, implying that Yahoo’s internet business was seen by the market as less than worthless.
There will understandably be some squeamishness as a result of the acquisition. Like the AOL acquisition, this deal will net Verizon significant content properties, including Yahoo’s verticals and tumblr. With net neutrality still a hotly debated topic at the highest levels of government, it seems Verizon will have even more incentive to lobby against it, something they’ve already been doing a lot of. Ownership of some of the content they serve through their telecom business is something Verizon could potentially capitalize on, possibly by taking a similar approach as what T-Mobile has done with free data for some video and music services with their Binge On and Music Freedom promotions.
Yahoo CEO Marissa Mayer is saying she intends to stay with the company as it transitions, but with Yahoo merging with AOL under Verizon, it’s unclear whether she would share leadership duties with AOL head Tim Armstrong, move into another role, or depart the company altogether post-acquisition. Yahoo stock is down 2.69% on the day following the announcement.