Verizon Buys Yahoo!: In Position to Become Third Largest Ad Network

It’s official—Verizon announced that it will acquire Yahoo!’s core business for $4.83 billion.

This news comes just one year after Verizon purchased AOL for $4.4 billion, making it the second time Verizon has snatched up the remnants of a once-thriving Internet company.

Now, the telecommunications leader hopes to combine Yahoo! and AOL to form an online powerhouse.

But what exactly does this deal entail, and what does it mean in terms of digital advertising and investments?

verizon-yahoo-infographic

What will Verizon acquire?

As part of the acquisition, Verizon will acquire Yahoo!’s 1 billion users across the following services:

  • Yahoo!’s operating business and advertising technology
  • Email service
  • Yahoo! Sports
  • Yahoo! Finance
  • Tumblr
  • Flickr

In addition, Verizon will amass Yahoo!’s real estate, including its Sunnyvale, CA headquarters.

What is Verizon’s master plan?

Once the acquisition is final, Verizon has the potential to outpace Microsoft, becoming the third largest advertising network, behind Google and Facebook.

In fact, if Verizon fully owned Yahoo! right now, it would generate a yearly ad revenue of about $3.6 billion. This still places the company a distant third, behind Google’s projected $27 billion and Facebook’s estimated $10 billion.

Verizon, the leading candidate in Yahoo!’s four-month sales process, hopes that pairing Yahoo! with AOL could provide a more competitive option for digital advertisers. It also aims to control more of the advertising experience on smartphones.

With the acquisition, Verizon’s goal is to achieve 2 billion mobile users by 2020 with $20 billion in revenue.

Yahoo!’s next step

Following the close of the deal, which Yahoo! shareholders are expected to approve early in 2017, Yahoo! will retain 15% stake in Chinese retailing giant Alibaba worth $32 billion, as well as its 36% stake in Yahoo! Japan, worth around $8 billion.

When the transaction is final, Yahoo! will to change its name and become a publicly traded investment company.

The sale could result in thousands of layoffs, and Yahoo! CEO Marissa Mayer has already laid off 1,900 Yahoo! workers since last September.

While Mayer plans to stay with the company and assist with the transition, Verizon executives have yet to comment on the new leadership team. If Mayer leaves following the sale, she will be entitled to a severance package valued at $55 million.

Sources:
ABC News
USA Today