We can hear you now!
Yesterday, Verizon FINALLY confirmed that it plans to buy Yahoo for $4.83B and combine it with AOL, which it bought for $4.4B last year. See a trend? Under the deal, Verizon will acquire Yahoo’s core business which includes its online brands and email service (a combined 225m monthly active users) and its Brightroll programmatic ad service. As for Marissa Mayer’s future, she said she plans to stay, but no decision’s been made on her future role. Considering she gets $57m in severance if she’s terminated, chances are she’ll be happy either way.
The deal does not include Yahoo’s stakes in Alibaba and Yahoo Japan...
Which is significant considering nearly all of Yahoo’s market value is linked to those ownership stakes (the Alibaba stake alone is valued at $31.2B). Remember Microsoft’s $45B bid for Yahoo back in 2008? That was for the whole shebang. So, while Verizon is acquiring Yahoo’s core assets along with its famous brand name, purple color, and exclamation point, the majority of the value ain’t coming with it. Yahoo says it’s keeping the Alibaba stake, rebranding itself, and becoming a separate investment business.
From Verizon’s perspective...
This is a very similar deal to the one they made with AOL and all about acquiring more users by building a portfolio of brands. “We want to get to 2 billion users,” said AOL CEO and architect of the deal, Tim Armstrong. “Everyone knows that’s the number that all huge media companies want to be at.” And because this acquisition pretty much gets them there (AOL and Yahoo both have around 1B users), Armstrong believes it will allow Verizon to “create the largest mobile and video business in the United States.”
It’s also about creating an advertising behemoth
Scale is extremely important in the online advertising business. Since most advertisers prefer to make a few big deals rather than multiple small ones, the largest media companies are able to command premium prices. With Yahoo and AOL under one roof, Verizon is now one of them. And not only can they offer advertisers packages that include media brands from both companies, but the insane amount of data Verizon gathers from their phone and cable customers will help ensure those ads are targeted super effectively.
Just don’t expect to see many changes right away
Consumers might not notice any changes for up to two years, as Verizon and Yahoo figure out how to navigate internal politics and get started on new projects. For now, you’ll likely just get a “Hey, you should switch to Verizon!” ad every time you accidentally find yourself on Yahoo Answers.