Today’s news that Verizon would acquire Yahoo’s core operating business moves the wireless network provider one $4.83-billion step closer to its goals of becoming a major media company.
The all-cash deal is slated to go into effect in the first quarter of 2017, and will encompass Yahoo search, e-mail and digital content products, including its four content categories of news, sports, finance and lifestyle. These verticals are what’s left of Yahoo’s digital magazines, which as little as a year ago numbered as many as 15 in the U.S.
A release sharing the news emphasized “content brands in categories including finance, news and sports” — and indeed, multiple reports included only those three categories — but according to a Yahoo spokeswoman, lifestyle, which means topics such as fashion, beauty and celebrity, would also be included in this mix. Joe Zee is editor in chief and executive creative officer of Yahoo Style.
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Verizon has aims to become a mobile-media business with an audience of two billion users and $20 billion in revenue by 2020.
Yahoo has more than one billion users, including 600 million monthly mobile users, and under the tutelage of chief executive officer Marissa Mayer, has focused its efforts on mobile, video, native advertising and social; Mayer calls these products “Mavens.” Its e-mail services have about 225 million monthly active users.
Yahoo’s advertising products include BrightRoll, a programmatic demand-side platform; Flurry, an independent mobile apps analytics service, and Gemini, a native and search advertising solution. This will be combined with AOL’s content and audience; Verizon bought AOL in for $4.4 billion in June 2015. AOL’s brands reach a global monthly audience of more than 500 million, and its mobile advertising network reaches about 600 million. Its content brands include TechCrunch, The Huffington Post and Makers.
This will mean that Verizon will claim more than 25 owned and partnered brands.
“This sale…is a great opportunity for Yahoo to build further distribution and accelerate our work in mobile, video, native advertising and social,” Mayer wrote in a Tumblr post. “With more than 100 million wireless customers, a shared view of the importance of mobile and video ad tech, a deep content focus through AOL, Verizon brings clear synergies to the table.” And in a call with investors this morning, she echoed those sentiments, saying that this would put Verizon in a “highly competitive position as the top global, mobile media company,” in addition to accelerating Yahoo’s digital advertising revenue stream.
Mayer said she would be planning to stay on. “I love Yahoo, and I believe in all of you,” she wrote in an e-mail to “Yahoos” this morning. “It’s important to me to see Yahoo into its next chapter.”
It’s worth noting that she and Yahoo will exist as they have been through the end of 2016; Mayer’s wording, both in calls to investors and in her prepared post, specifically said only that she plans to see Yahoo into its next chapter. It could not be determined what her role might be afterward and how she would divide power with AOL chief executive officer Tim Armstrong, who worked with Mayer when both were at Google.
But some experts think Armstrong might be more successful running Yahoo. Mayer has been under pressure from investors “for failing to ‘stop the rot’ at Yahoo,” said Warwick Business School business professor John Colley. “It looks like Mayer will be passing that privilege to Armstrong, who will certainly have his work cut out.”
Although Mayer is confident that this move would “unlock shareholder value” for Yahoo, Colley said that challenges such as loss of market share and key personnel often lead to an unsuccessful integration.
“Unfortunately, ‘alliances of the weak’ in an attempt to make a single strong competitor rarely work. They are usually left with a bigger ‘weak’ player,” Colley said. “This is a quite a major diversification from mobile telecommunications and it is not clear what benefits may arise from owning both [Yahoo and AOL], as they are such different businesses. The mobile telecoms industry is maturing and this acquisition appears to be more about finding future growth in unrelated diversifications, which is always a high-risk path.”
Others say the deal makes sense. Forrester vice president and principal analyst Shar VanBoskirk said that it would be valuable to consumers and advertisers because consumers like the brand.
“For all the wobbliness of Yahoo’s brand identity, the Yahoo brand still holds a lot of consumer-affinity,” Van Boskirk said. “It could be a nice boost in an industry like telecom where most subscribers disdain even the providers they are quite loyal to.”
She added that data from Yahoo and AOL, in home via cable boxes and on mobile via smart devices, will allow for more targeted ad products compared to “online giants such as Google,” in addition to a better user experience than other cable or telecom providers.
Armstrong said that this transaction was about “unleashing Yahoo’s full potential, building upon our collective synergies, and strengthening and accelerating that growth,” he said. “Combining Verizon, AOL and Yahoo will create a new powerful competitive rival in mobile media, and an open, scaled alternative offering for advertisers and publishers.”