U.S.-based Verizon has confirmed a deal to acquire Yahoo’s search and web properties for US $4.83 billion in cash. These will be merged with AOL, which Verizon purchased last year. Verizon will also acquire technology assets from Yahoo including the programmatic ad platform Brightroll, mobile apps analytics service Flurry, and Gemini, Yahoo’s mobile search and native advertising platform. With the deal, Verizon will have a portfolio of over 25 leading consumer online brands, including the 225 million users of Yahoo email and over 600 million monthly mobile visitors to Yahoo websites. As for Yahoo, it will hold on to its stakes in Alibaba and Yahoo Japan, its cash and convertible notes, certain minority investments, and non-core patents. Following the takeover, which is expected to close by Q1 2017, Yahoo will change its company name and operate as a publicly traded investment company.
As we have pointed out on numerous occasions, as traditional mobile services approach commodity status, operators have become aware that content is king. Content, in fact, is the key to future revenue growth, and in order to have access to that content, operators must either license it or purchase it. Very few telecom players in the world have pockets as deep as Verizon, and given its assets of US $220 billion, the U.S. giant has the ability to spend generously for the assets it needs. The price tag of nearly US $5 billion for Yahoo’s web properties may seem high, but it represents a tiny fraction of the internet company’s one-time valuation of US $125 billion. Yahoo has declined precipitously since its glory days during the first internet boom, but it still has much to offer. In particular, it should significantly bolster the video content portfolio that Verizon began building with its acquisition of AOL.
Verizon CEO Lowell McAdam said, “By acquiring Yahoo’s operating business, we are scaling up to be a major competitor in mobile media. Yahoo’s operations provide a valuable portfolio of online properties and mobile applications, which attract over 1 billion monthly active consumer views.” He added, “Going forward, this acquisition will put us in a great position as a top global media company and give us a significant source of revenue growth for the future.” Both Verizon’s cable and mobile businesses can benefit significantly from this acquisition, as long as the operator deploys the content in a way that meets the ever-evolving demands of consumers. But whether the operator can truly compete with Google and Facebook in the realm of content delivery remains to be seen.