The deal is subject to customary closing conditions, approval by Yahoo’s shareholders and regulatory approvals. It is expected to close in Q1 of 2017.
The sale does not include Yahoo’s cash, its shares in Alibaba Group Holdings or Yahoo Japan, Yahoo’s convertible notes, select minority investments or Yahoo’s non-core patents (a.k.a. the Excalibur portfolio). Those assets will continue to be held by Yahoo, which will change its name at the closing of the sale and become a publicly-traded investment company. Yahoo intends to return the bulk of its net cash to shareholders.
The sale will put Yahoo side-by-side with its web 1.0 rival AOL, which was purchased by Verizon last year in a deal worth $4.4 billion.
“Yahoo and AOL popularized the internet, email, search and real-time media,” said Yahoo CEO Marissa Mayer in a statement. “It’s poetic to be joining forces with AOL and Verizon as we enter our next chapter focused on achieving scale on mobile. We have a terrific, loyal, experienced and quality team, and I couldn’t be prouder of our achievements to date, including building our new lines of business to $1.6 billion in GAAP revenue in 2015. I’m excited to extend our momentum through this transaction.”
Most would say that Yahoo needs to reverse its momentum. The company’s efforts to establish itself as a producer original, TV-style online content were particularly woeful, capped by a $42 million write-down for its original shows “Other Space,” “Sin City Saints” and “Community.”
Yahoo generated headlines (and 15.2 million unique views) with the first global digital telecast of a regular season NFL game, garnered headlines, but its approach was more typified by its hiring of former “CBS Evening News” anchor and “Today” (NBC) co-host Katie Couric as global news anchor, a boomer-friendly move that put it out of step in a world where appealing to millennials and Gen Z audiences is considered all-important.
Yahoo does possess numerous core strengths, including a strong cash flow, popular finance, news and sports portals and an email service with approximately 225 million monthly active global users — enough to make it worth more than $400 million more to Verizon than AOL was.
But while AOL was vastly diminished from the company it was in 2000, when it purchased Time Warner for $164 billion, it was on the rise under CEO Tim Armstrong, with investments in popular digital brands such as The Huffington Post, TechCrunch and Engadget and a strong programmatic advertising network.
“Just over a year ago we acquired AOL to enhance our strategy of providing a cross-screen connection for consumers, creators and advertisers,” said Lowell McAdam, Verizon Chairman and CEO, in a statement. “The acquisition of Yahoo will put Verizon in a highly competitive position as a top global mobile media company, and help accelerate our revenue stream in digital advertising.”
The Yahoo purchase is the latest of a string of big moves by Verizon to grow its synergistic operations across the web and, more significantly, mobile.
Last fall, Verizon launched the mobile-first entertainment platform Go90, with content deals with AwesomenessTV, Fullscreen, New Form Digital, StyleHaul, DanceOn and other digital-first studios.
In March, Verizon teamed with publishing giant Hearst to form the 50–50 joint venture Verizon Hearst Media Partners to harness their combined digital video content and production capabilities, initially focusing on two channels of video programming, RatedRed.com and Seriously.TV, to be distributed across Go90 and AOL, as well as third-party networks and licensors.
The following month, it entered into an agreement to buy a 24.5% stake in AwesomnessTV for $159 million, deepening its connection to Hearst, which paid $81 million its own 24.5% stake in the multi-platform production company in Dec. 2014.
At the end of June, Go90 unveiled its most ambitious project to date, “The Runner,” a reality-competition series executive produced by Ben Affleck and Matt Damon, airing three times daily, in which teams of “chasers” pursue an individual across the U.S. It also expanded its L.A. operations, hiring Ivana Kirkbride as its new chief content officer, reporting to Chip Canter, Verizon GM of digital entertainment and Go90.
Verizon will announce its Q2 2016 earnings tomorrow, July 26.
In a memo to Yahoo employees, CEO expressed pride in her accomplishments with the company.
“We set out to transform this company — and we’ve made incredible progress,” Mayer wrote. “We counteracted many of the tectonic shifts of declining legacy businesses, and built a Yahoo that is unequivocally stronger, nimbler, and more modern. We tripled our mobile base to over 600 million monthly users, we invested in and built Mavens from basically zero in 2011 into $1.6B of GAAP Revenue in 2015, we streamlined and modernized every aspect of our consumer products, and, with Gemini and BrightRoll, we dramatically improved our advertiser products. This only scratches the surface of what we’ve achieved… and we all know how much hard work it took to get here.
Mayer also pledged to remain at Yahoo through its transition.
“For me personally, I’m planning to stay,” she wrote. “I love Yahoo, and I believe in all of you. It’s important to me to see Yahoo into its next chapter.”