The AOL logo is displayed on a sign, in front of the AOL Inc. offices in Palo Alto, California, and the Yahoo logo is displayed in front of the Yahoo headquarters in Sunnyvale, California. Agence France-Presse. Verizon Communications Inc. is selling its internet companies, which include Yahoo and AOL, for $5 billion, putting an end to a costly and disappointing run in the media and advertising industry.
Despite spending over a decade and billions of dollars to acquire a stable of internet brands, the New York-based telecom behemoth has struggled to gain momentum in a competitive market. Competitive internet advertising space has been dominated by Facebook Inc and Google, and has instead concentrated its efforts on improving 5G.
After deducting $4.6 billion from the valuation of the businesses in 2018, Verizon will receive just $4.25 billion in cash from private equity company Apollo Global, along with $750 million in preferred interests and a 10 percent of stake in the unit less than half of what it paid for the businesses in the first place.
In a steady stream of acquisitions, Verizon sold blogging network Tumblr for an unspecified sum in 2019, and news website HuffPost to BuzzFeed last year, after taking over from his mentor Lowell McAdam, who was in charge of the company's goal of becoming a media and telecom behemoth, Verizon CEO Hans Vestberg announced a series of media divestitures.
Vestberg has prioritised expanding the telecom network, spending $52.9 billion on C-band spectrum in a government auction earlier this year. The divested subsidiary, which was formerly known as Oath and was recently renamed Verizon Media, will now be known as Yahoo when the transaction closes in the second half of 2021, and Guru Gowrappan will continue to lead the business.
The deal for Apollo comes at a time when the major internet networks have snatched up large chunks of the digital advertising market, attracting regulatory scrutiny. Apollo, a Shutterly and Expedia Inc founder, was involved in the Yahoo asset when it ran a process in 2017.
Apollo partner Reed Rayman said that “the private equity firm would aim to expand ads and ecommerce, as well as develop key assets such as Yahoo Finance and Yahoo Sports, through new business initiatives such as subscriptions”. Last fall, Verizon began contacting prospective customers. According to Reuters, Yahoo Finance was looking for buyers in 2019, and some industry estimates placed the company's valuation at about $2 billion.
In 2017, Verizon spent nearly $4.48 billion on Yahoo, betting that its 1 billion-plus users would be a fertile audience for online advertising. In 2015, it paid $4.4 billion for the email service AOL. TechCrunch, Makers, Ryot, and Flurry are among the online brands in Verizon Media's portfolio, according to the company's website. It made $1.9 billion in sales in the first quarter of 2021, up 10.4 percent year over year.