It’s official: Verizon Will End Yahoo’s Struggle With a $4.8 Billion Deal

Yahoo! Inc.’s years-long fight to survive as a standalone company will draw to a close. Verizon is set to acquire millions of users, and save Marissa Mayer’s ass, all in one fell swoop.  And, although Marissa failed miserably her payout is at least $55 million!

But, here’s the thing… the widely reported $55 million figure grossly understates what Mayer is likely to pocket after the deal closes.

The real number: $122,578,795 (from an article on Fortune.com)

Sense I’m bitter?  How many out of work genius digital marketers are out in Silicon Valley who could do exponentially better?  You can bet hundreds, or thousands.  However, none of them have such a nice pair of legs, cute smile, or college pedigree (Stanford).

Verizon Communications Inc. will announce plans to buy Yahoo’s core assets for a bit more than $4.8 billion before the market opens, said two people with direct knowledge of the situation who asked not to be identified because the information isn’t public. The deal includes Yahoo real estate assets, while some intellectual property is to be sold separately, the people said. Yahoo will be left with its stakes in Alibaba Group Holding Ltd. and Yahoo Japan Corp., with a combined market value of about $40 billion.

A transaction stands to finally seal the fate of web pioneer Yahoo after months of speculation and pressure from investors including Starboard Value LP. The deal will add the company and its millions of daily users to Verizon’s growing stable of media properties and is also likely to end the reign of Yahoo Chief Executive Officer Marissa Mayer, who tried and failed to re-invent Yahoo as an independent company.

Verizon spokesman Bob Varettoni and Yahoo spokeswoman Rebecca Neufeld declined to comment. Yahoo hasn’t laid out plans for its investments in Alibaba and Yahoo Japan.

What’s the Strategy?

With its core wireless business maturing, Verizon is expected to keep Yahoo mostly intact to compete with Alphabet Inc.’s Google and Facebook Inc. in digital ads by tapping into users on sites like Yahoo Finance. The takeover will double the size of Verizon’s digital advertising, placing it as a distant third behind Google and Facebook in the $187 billion market.

“The deal speaks to a clear strategy shift at Verizon,” Craig Moffett, an analyst with MoffettNathanson, said Sunday. “They are trying to monetize wireless in an entirely new way. Instead of charging customers for traffic, they are turning to charging advertisers for eyeballs.”

Yahoo gained 1.4 percent to close at $39.38 on Friday after Bloomberg News reported it was closing in on a deal with Verizon. Shares of Verizon advanced 1.3 percent to $56.10.

The sale completes Yahoo’s evolution from influential search pioneer and web portal juggernaut to, in the end, a once-dominant brand that lost its way.

Parties as diverse as Warren Buffett and The Daily Mail were interested in buying Yahoo. But after a sale process that dragged on for months, Verizon long viewed as the frontrunner, is walking away with Yahoo’s more than one billion monthly active users.

Current Yahoo shareholders will keep the company’s lucrative investments in Chinese e-commerce giant Alibaba and Yahoo Japan. They will be spun into a separate, yet-to-be-named, publicly traded company. The deal also excludes some patents and Yahoo’s cash.

The Verizon deal must be approved by regulators and is expected to be finalized in the first quarter of 2017.

“By acquiring Yahoo, we are scaling up to be a major competitor in mobile media,” Verizon CEO Lowell McAdam said in a statement Tuesday, when the company reported second quarter earnings.

And like many media companies, Verizon believes that focusing on mobile content will help it attract millennials — young, mobile-addicted consumers who could turn into long-term customers. On a call with investors, McAdam specifically pointed to the popularity of Yahoo’s mobile services, including sports, finance and email.

Verizon’s transformation has been in the works for years, but its investments have ramped up heavily in the past two years.

Verizon bought AOL for $4.4 billion in 2015, the same year it launched its own mobile video service Go90. And earlier this year, Verizon partnered with Hearst to invest in video-driven and millennial-focused media companies, Complex Media and AwesomenessTV.

Although Verizon sees Yahoo as a complement to these investments, this most recent acquisition may not deliver as much as Verizon hopes.

“Verizon believes that millennials don’t watch linear TV anymore,” said Jefferies analyst Mike McCormack.

But according to Jefferies’ case studies, that’s not entirely the case. Younger viewers still seem to want a lot of traditional content that isn’t short-form video, according to McCormack, which could be a disadvantage for Verizon. And McCormack said that, anecdotally, Yahoo users tend to be older than millennials. “I wonder if they’re going to attract the right demographic with this acquisition.”

Listen to a great podcast about Yahoo on Seeking Alpha to learn more.

More information available on Bloomburg.com.