New York: Verizon Communications said yesterday it would buy Yahoo’s core Internet properties for $4.83 billion in cash to expand its digital advertising and media business, ending a protracted sale process for the fading Web pioneer.
The purchase will boost Verizon’s AOL Internet business, which it bought last year for $4.4bn, as it gains access to Yahoo’s advert technology tools, BrightRoll and Flurry, and search, email and messenger assets.
Verizon, the number one US wireless operator, has in recent years looked to mobile video and advertising for new sources of revenue in an oversaturated wireless market. It has also scaled back on its Fios TV and Internet service.
Verizon could combine data from AOL and Yahoo users in addition to its more than 100 million wireless customers to help advertisers target users based on online behaviour and preferences.
“Yahoo gives us scale that is what is most critical here, Marni Walden, who is head of product innovation and new business at Verizon said, adding that the company’s audience will go from the millions to the billions. “We want to compete and that is the place we need to be.”
Yahoo chief executive Marissa Mayer said on a conference call with investors that she planned to stay at Yahoo through the deal’s close.
Walden, who will head the combined company, said the new leadership team has yet to be determined.
“It’s a decade of mismanagement that has finally ended for Yahoo,” said Recon Analytics analyst Roger Entner. “It’s the continuation of an extension of Verizon’s strategy towards becoming a wireless Internet player and a move away from telecom regulation for Verizon into an unregulated growth industry.”
The integration of Yahoo will not come without challenges. Yahoo hired Mayer, a former Google executive, as CEO in 2012 with a mandate to engineer a turnaround, but her strategy to focus on mobile, video and social content could not revive the company and reverse its sagging stock price.
In its latest results, Yahoo reported a second-quarter net loss of $439.9m as it wrote down the value of Tumblr, the microblogging and social media service it acquired in 2013 for $1.1bn.
With AOL and Yahoo, Verizon would still be far behind Internet juggernauts Google and Facebook.
According to market research firm eMarketer, Yahoo is expected to generate $2.32bn in net US digital advert sales, while AOL is expected to make $1.3bn in 2016. Facebook and Google are forecast to deliver sales of $10.3bn and $24.63bn, respectively, by the end of this year.
The Verizon deal would transform Yahoo into a holding company, with a 15 per cent stake in Chinese e-commerce company Alibaba and a 35.5pc interest in Yahoo Japan as well as Yahoo’s convertible notes, certain minority investments and Yahoo’s noncore patents.
Yahoo currently has $7.7bn in cash, in addition to the $4.8bn it will receive at the close of the deal, which it plans to return to shareholders, Yahoo executives said.