Verizon has been looking to mobile video and advertising for new sources of revenue outside the oversaturated wireless market.
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But Verizon appeared to be the leading candidate because of its ability to integrate AOL’s advertising technology into Yahoo services.
Both should help Verizon build its digital media portfolio, which will also be an interesting turnaround for Yahoo which has often been criticized for seeing itself more of a media company than a tech company.
Former Google veteran Marissa Mayer who took charge of the company in 2012 sought to fix this problem but her efforts didn’t pay off.
Yahoo has come under pressure from shareholders angry with a downturn in its performance over the past eight years as it lost out to the likes of Google and Facebook.
CEO Marissa Mayer announced that she intends to stay back at the company once the deal is closed.
Yahoo says it has more than 1 billion users, though Outsell analyst Randy Giusto believes only about 200 million are habitual visitors. “We want to compete and that’s the place that we need to be, so we’re very pleased with where we are today”, Walden said. “It’s important for me to see Yahoo into its next chapter”, quotes Sydney Morning Herald. She said she was “open-minded” about a possible role with the combined companies.
According to eMarketer, Google and Facebook have more than half the projected $69 billion USA digital advertising market.
AOL is best known for the dial-up internet it popularized in the ’90s and owns popular media sites like Huffington Post and TechCrunch, but Verizon primarily wanted its ad technology.
“With [Verizon’s] aggressive aims to grow global audience to 2 billion users and US$20 billion in revenue within the mobile-media business by 2020, Yahoo’s products and brand will be central to achieving these goals”, wrote Mayer.
Facebook and Google are forecast to deliver sales of $US10.3 billion and $US24.63 billion, respectively, by the end of this year, according to eMarketer.
Not included in the deal are the 15 percent stake in Chinese e-commerce giant Alibaba and its 35 percent interest in Yahoo Japan. They are worth about $US40 billion based on their market capitalisations, while Yahoo had a market value of about $US37.4 billion at Friday’s close.
Over the years, Verizon has expanded into fiber-optic broadband, enabling it to deliver “bundles” of services that include internet, television and phone service.
The deal is subject to customary closing conditions, approval by Yahoo’s shareholders, and regulatory approvals, and is expected to close in the first quarter next year.
It’s unclear what Mayer will do after the deal closes. What little of Yahoo is left will be a holding company for its Alibaba and Yahoo Japan investments, as well as its patent portfolio.
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Yahoo’s management also indicated on Monday that Remain Co. plans to hold on to its Alibaba shares “indefinitely” until it finds a way to sell it in a tax-free way.
