Verizon has officially revealed its intention to acquire Yahoo!’s core operations for a staggering $4.83 billion. This announcement follows closely on the heels of Verizon’s prior acquisition of AOL for $4.4 billion, marking the second occasion the telecommunications giant has acquired the remnants of a once-prosperous internet company. Verizon’s objective now is to merge Yahoo! and AOL to create a formidable online presence. The implications of this deal for the digital advertising landscape and investment strategies are the subject of this analysis.
The acquisition encompasses Yahoo!’s 1 billion users across a range of services, including:
– Yahoo!’s operational business and advertising technology
– Email services
– Yahoo! Sports
– Yahoo! Finance
– Tumblr
– Flickr
Furthermore, Verizon will also acquire Yahoo!’s property assets, including its headquarters in Sunnyvale, CA.
Upon completion of the acquisition, Verizon has the potential to surpass Microsoft and emerge as the third-largest advertising network, trailing only Google and Facebook. Currently, if Verizon were to fully own Yahoo!, it would generate approximately $3.6 billion in annual ad revenue, a figure that would still place it in third position, behind Google’s projected $27 billion and Facebook’s estimated $10 billion. As the leading candidate in Yahoo!’s four-month sales process, Verizon is hopeful that the integration of Yahoo! with AOL will offer a more competitive alternative for digital advertisers and enhance its control over smartphone advertising experiences. The company aims to reach 2 billion mobile users by 2020, with $20 billion in revenue.
Post-deal closure, anticipated to be approved by Yahoo! shareholders in early 2017, Yahoo! will retain a 15% stake in Chinese retail giant Alibaba, valued at $32 billion, and a 36% stake in Yahoo! Japan, valued at approximately $8 billion. Upon the transaction’s completion, Yahoo! is set to rebrand and operate as a publicly traded investment company.
The sale is expected to lead to thousands of job losses, and Yahoo! CEO Marissa Mayer has already initiated layoffs of 1,900 employees since last September. Despite Mayer’s plans to remain with the company to aid in the transition, the future leadership team at Verizon has yet to be announced. Should Mayer depart following the sale, she would be entitled to a severance package worth $55 million.
**Sources**: ABC News, USA Today
