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Verizon Buying Yahoo for $4.8 Billion, Will It Become a Player in Local?

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Verizon is buying Yahoo for $4.83 billion in cash, which follows the telecom company’s $4.4 billion acquisition of AOL in 2015. If one had to point to a single factor behind the sale I would argue it’s the rise of Facebook and Google’s display business — Facebook in particular. Together they all but guaranteed that Yahoo couldn’t regain momentum in its “core business.”

One interesting angle here is that, after getting out of the local search business when it spun out its yellow pages business a decade ago, Verizon is now back in it. Rival AT&T was reportedly one of the bidders for Yahoo, although it’s not clear how serious it was. Years ago, there was considerable speculation about an AT&T-Yahoo combination when AT&T was still in the directory business (it still owns a minority stake in YP).

The successful integration of AOL and Yahoo will be challenging for Verizon — the combined unit will be run by Marni Walden, EVP and President of the Product Innovation and New Businesses at Verizon. However, the New York based telecom is now the number three internet company behind Google and Facebook. The acquisitions are part of Verizon’s diversification away from stagnant or declining businesses (wireline phone, cable TV).

With its AOL and Yahoo assets, Verizon now has a significant digital advertising business and relationships with both Google (search) and Microsoft (display). The fact that the company is a wireless carrier and ISP also carriers numerous and intriguing possibilities for digital media and marketing going forward. Indeed, the company has a more “complete” set of assets than Facebook or Google.

Yahoo at one time had a leading maps and local search business. That changed when the company decided it couldn’t keep up with Google in Maps. After that its local assets slowly languished. Today most of its local business reviews content is provided by Yelp and its maps are provided by HERE (formerly Nokia). I would expect over time for Mapquest to take over that position.

Here’s what Verizon said in its press release about the combination of AOL and Yahoo:

The addition of Yahoo to Verizon and AOL will create one of the largest portfolios of owned and partnered global brands with extensive distribution capabilities. Combined, AOL and Yahoo will have more than 25 brands in its portfolio for continued investment and growth. Yahoo’s key assets include market-leading premium content brands in major categories including finance, news and sports, as well as one of the most popular email services globally with approximately 225 million monthly active users. Additional technology assets in the advertising space include Brightroll, a programmatic demand-side platform; Flurry, an independent mobile apps analytics service; and Gemini, a native and search advertising solution.

Verizon is not buying Yahoo’s Alibaba shares or its interest in Yahoo Japan or its “non-core patents.” However, the small business assets that Yahoo was going to spin out are now going to Verizon.

Yahoo was founded in 1994. The company went public two years later. Microsoft unsuccessfully tried to buy Yahoo for about $45 billion in 2008. Verizon is buying Yahoo for a tenth of that price. Yahoo CEO Marissa Mayer is expected to leave the company after the deal closes with a package worth more than $50 million.

Although it’s in a different category than Web.com’s acquisition of Yodle or Gannett’s acquisition of ReachLocal, we might see the deal in the context of a larger move toward consolidation in the digital (and local) arena.

Verizon is the largest US wireless carrier. It can potentially provide Yahoo mobile properties with a significant boost. Verizon may also be able significantly boost Mapquest’s visibility and usage through its mobile distribution. It will be interesting to see whether and where Verizon invests going forward.

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