One of the tech world’s worst kept secrets is now out in the open: Verizon are indeed to acquire Yahoo for $4.8 billion. The sale does not include Yahoo’s cash, its shares in Alibaba Group Holdings, its shares in Yahoo Japan, Yahoo’s convertible notes, certain minority investments, and Yahoo’s non-core patents. Those assets will continue to be held by Yahoo, which will change its name at closing today (to what, we don’t yet know) and become a registered, publicly traded investment company.
Marissa Mayer, CEO of Yahoo, said: “The sale of our operating business, which effectively separates our Asian asset equity stakes, is an important step in our plan to unlock shareholder value for Yahoo. This transaction also sets up a great opportunity for Yahoo to build further distribution and accelerate our work in mobile, video, native advertising and social.”
Mayer added, “Yahoo and AOL popularised the Internet, email, search and real-time media. It’s poetic to be joining forces with AOL and Verizon as we enter our next chapter focused on achieving scale on mobile. We have a terrific, loyal, experienced and quality team, and I couldn’t be prouder of our achievements to date, including building our new lines of business to $1.6 billion in GAAP revenue in 2015. I’m excited to extend our momentum through this transaction.”
Tim Armstrong, CEO of AOL, said, “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.”
While much of the tech media takes great pleasure in labelling both Yahoo and AOL as fading internet stars, Tim Armstrong has done well in building up AOL’s business and it’s going to be fascinating to see if he can do the same with the new combined entity, and with the help of Marissa Mayer.
Key points to consider:
- One of the reason Verizon is buying Yahoo is that it provides the opportunity for Verizon to further exploit its mobile data by packaging it with media in the US. However, Verizon doesn’t have the same data footprint in other markets so Verizon will have to either seek out data partnerships with other non-US telcos or simply acquire them.
- Verizon has already acquired AOL of course. AOL itself has had to integrate all of its own tech acquisitions over the last couple of years, including the Microsoft Advertising business it took over in 2015 and Millennial Media, a mobile ad technology company. Throwing Yahoo into the mix is going to be an serious integration challenge from a technological, cultural and HR perspective, but if executed correctly Facebook and Google just might have a serious challenger on their hands.
- When it comes to ad tech, it’s hard to see where the value is for AOL/Verizon. Yahoo aren’t known for strong ad tech, even after the company spent $640 million on BrightRoll in 2014, which many say was more of a slick sales operation (which is no small thing) rather than a company founded on solid ad tech. It seems likely that only the best and most experienced staff will be moved over to AOL. Wider cuts to staff also seem inevitable as there will be a lot of overlap with AOL in roles like marketing and finance.
- The acquisition is also interesting from a video content perspective. AOL have had a heavy focus on video for some time now, ranging from video content syndication right through to programmatic TV. Yahoo will undoubtedly bring both new content and new distribution opportunities, and in spite of the weak technology BrightRoll still have quite a large portfolio of buyers and publishers.