It has been an interesting past few months as the future of Yahoo Inc. remained unknown. However, that has finally come to an end as Verizon has officially announced its acquisition of Yahoo's core business for $4.83 billion in cash, in a deal that includes Yahoo's advertising content, search and mobile activities.
Upon being taken under Verizon's umbrella, the firm will be integrated with AOL, and Verizon EVP and President of the Product Innovation and New Businesses organization Marni Walden will be leading the charge.
"Just over a year ago we acquired AOL to enhance our strategy of providing a cross-screen connection for consumers, creators and advertiser," Verizon Chairman and CEO Lowell McAdam said in the announcement. "The acquisition of Yahoo will put Verizon in a highly competitive position as a top global mobile media company, and help accelerate our revenue stream in digital advertising."
The deal has not been approved by regulators just yet, but this development will mean big things for both Yahoo and Verizon when it does.
For Yahoo, this ends months of speculation about the fate of the troubled internet firm. By now, it's common knowledge that the firm has been in a bit of trouble for quite some time. When it was initially conceived, Yahoo was the place to go to for almost anything (like what Google is now), with offerings such as email providers (Four11), web hosting services (Geocities), and video and radio simulcasting through the $5.7 billion acquisition of Mark Cuban's Broadcast.com.
However, things soon went south following the dot-com collapse. And things only became worse following the rise of rival sites such as Google, which came with a superior search algorithm, and Facebook, which offered a new means of browsing online, making Yahoo's monolithic feeds a thing of the past.
In order to counter this, Yahoo made Marissa Mayer CEO in 2012, and under her leadership, the company shifted from its standard business, and pursued newer, more modernized ventures such as streaming services, shopping services, social networking and others, spending hundreds of millions in the process.
Under normal circumstances, this wouldn't necessarily be a bad thing, as branching out would provide Yahoo a chance to revitalize itself. Unfortunately, in Yahoo's case, this isn't what happened, and none of those ventures really panned out. In the end, the company was left in the same position that it was in before Mayer took up her position, with its strongest assets being Alibaba, which is worth about $32 billion, and Yahoo Japan, worth approximately $8 billion.
Yahoo needed something to come to its rescue, and Verizon took that role, becoming its proverbial white knight in armor.
Meanwhile for Verizon, this deal means that the telecom company can finalize its strategy to bolster its advertising and media businesses, which complement its mobile and fixed network operations that began with the $4.4 billion acquisition of AOL in 2015.
At the time, Verizon, which was the top dog when it comes to U.S. wireless carrier size, was starting to stagnate in terms of number of sales and new users. As a result, the company started to make more effort in branching out into other ventures such as telemedicine, video streaming and connected cars. In this case, the AOL acquisition, as stated before, was an an attempt to bolster its advertising business.
Verizon needed something to take its advertising business to the next level, thus making it a viable competitor of Google and Facebook — with each facing their own problems when monetizing first-party hosted content — and Yahoo can potentially fill that role.
Of course, now with one question answered, plenty more arise to take its place, the first of which is how Verizon will integrate Yahoo into AOL. As of its most recent earnings call, Yahoo said that it had 8,800 employees and 700 contractors — comparatively, AOL has about 5,600 employees. Combining these two teams into a single operation will take quite a bit of finesse. Another question is how profitable this acquisition will be. As stated before, Yahoo has been hemorrhaging money for the past few years, so Verizon needs to find a way to turn Yahoo into a profitable company so that AOL's bottom line doesn't get damaged.
Regardless of what happens as a result of the deal, there is one thing we know for certain: Mayer stands to make a boatload of cash, with reports speculating that she stands to make $57 million (thanks to a severance package) once everything is finalized.
The deal is expected to close in Q1 2017.