Yahoo bought by Verizon for $4.83 billion
Yahoo’s 22-year run as an independent company is over, marking the end of an era for one of the earliest web giants — and one of the few to maintain some level of relevance as the internet evolved. Verizon acquired Yahoo’s core business on Monday for $4.83 billion, the culmination of months of speculation about the future of the web company.
It had been widely expected that a sale deal would be the end of CEO Marissa Mayer’s tenure atop the company, but in an email to employees, Mayer said she’s staying. “For me personally, I’m planning to stay. I love Yahoo, and I believe in all of you. It’s important to me to see Yahoo into its next chapter,” she wrote.
“Yahoo is a company that changed the world. Now, we will continue to, with even greater scale, in combination with Verizon and AOL,” she added. The text of her post can be found at the bottom of this story.
Mayer’s turnaround efforts had been the subject of plenty of criticism, particularly for numerous expensive acquisitions that did little to stem a broader decline in its online advertising business. Just how long Mayer will remain with Verizon has already become the subject of plenty of speculation.
If Mayer is pushed out, she is inline for a severance package that could be worth more than $50 million — bringing her overall compensation for her work at Yahoo to about $218 million, according to compensation analysis firm Equilar.
The addition of Yahoo is Verizon’s second major digital acquisition in about a year, following on its $4.4 billion purchase of AOL in May 2015. Yahoo and AOL are expected to merge some of their operations.
The combination of AOL and Yahoo now gives Verizon two of the biggest and oldest online media operations, which is notable since they still tend to receive traffic directly to their homepages thanks in part to email services. Together, Verizon/AOL and Yahoo would make up around 2.2% of 2016 global ad revenue, making it among the leaders but still well behind Google (31%) and Facebook (12%), according to eMarketer.
“Just over a year ago we acquired AOL to enhance our strategy of providing a cross-screen connection for consumers, creators and advertisers,” said Verizon CEO Lowell McAdam in a press release. “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 deal ends a contentious battle between Yahoo’s executives, namely Mayer, and investors that had called for the company to look for a buyer. Mayer had served as chief executive for just under four years, having attempted to modernise the company by focusing on newer areas such as mobile, video and native advertising, in which Yahoo lagged. That turnaround had done little to improve the company’s earnings or sway investors that the company could return to glory.
For all Yahoo’s troubles, the company had a major ace up its sleeve — a sizable stake in e-commerce giant Alibaba. Yahoo’s stock became a proxy investment in Alibaba, allowing investors to grab a piece of the ecommerce giant before it went public. Yahoo’s stock price kept going up despite meager earnings.
That provided Mayer with something of a runway that would eventually end in September 2014, when Alibaba went public.
At that point, the blessing of Alibaba stock became a curse for Mayer. Yahoo was sitting on a huge chunk of valuable stock, and investors felt they were entitled to a payday from that investment.
Since then, Mayer has been under serious pressure to return that investment to investors in a way that avoids major taxes. The company had originally explored spinning the Alibaba stake off into a separate company. Those plans did not come to fruition, and Mayer was eventually forced to cave to investor pressure to sell its core business.
For the average Yahoo consumer, it does not look like much will change, at least not in the near future. The company’s consumer services, including email, will continue to run — but now they’re owned by Verizon. The rest of the company — Alibaba, Yahoo Japan and a patent portfolio — is being left behind.
Change is expected, however, inside Yahoo. The company currently employs more than 10,000 people, a number that could be drastically cut. There are also various parts of Yahoo that is being left behind. Verizon bought what is called Yahoo’s “core” business — primarily just its U.S. web operations and advertising business. That leaves behind various holdings including its valuable shares of ecommerce giant Alibaba, Yahoo Japan and a series of patents. Those assets will remain with the original company, which will change its name and be publicly traded.
The Marissa Mayer email in full:
Moments ago, we announced an agreement with Verizon to acquire Yahoo’s operating business. This culminates a rigorous, thorough process over many months, and yields a great outcome for the company. Today’s announcement not only brings us an important step toward separating Yahoo’s operating business from our Asian asset equity stakes, it also presents exciting opportunities to accelerate Yahoo’s transformation. Among the many entities that showed interest in Yahoo, Verizon believed most in the immense value we’ve created, and in what a combination could bring our users, our advertisers, and our partners.
This is a good moment to reflect on Yahoo’s journey to date.
Yahoo is a company that changed the world. Before Yahoo, the Internet was a government research project. Yahoo humanized and popularized the web, email, search, real-time media, and more.
What really sets Yahoo apart is the shared passion to create great products for our 1B+ users, and in doing so, transforming the world for the better. You can clearly see that spirit, that commitment, that fight in the work we’ve done together over the past few years. We set out to transform this company – and we’ve made incredible progress. 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.
It’s because of that hard work and resilience, that Yahoo will realize amazing opportunities in its next chapter.
This sale is not only an important step in our plan to unlock shareholder value for Yahoo, it is also a great opportunity for Yahoo to build further distribution and accelerate our work in mobile, video, native advertising, and social. As one of the largest wireless and cable companies in the world, Verizon opens the door to extensive distribution opportunities. With more than 100 million wireless customers, a shared view of the importance of mobile and video ad tech, a deep content focus through AOL, Verizon brings clear synergies to the table. And with their aggressive aims to grow global audience to 2B users and $20B in revenue within the mobile-media business by 2020, Yahoo’s products and brand will be central to achieving these goals. Joining forces with AOL and Verizon will help us achieve tremendous scale on mobile. Imagine the distribution challenges we will solve, the scale we will achieve, the products we will build, and the advertisers we will reach now with Mavens – it’s incredibly compelling.
The strategic process has created a lot of uncertainty, but our incredibly loyal and dedicated employee base has stepped up to every challenge along the way. Through the first half of the year, we met our operational goals and overachieved on plan. But, further, there are things that you cannot measure, like the passion of the people behind the products. The teams here have not only built incredible products and technologies, but have built Yahoo into one of the most iconic, and universally well-liked companies in the world. One that continues to impact the lives of more than a billion people. I’m incredibly proud of everything that we’ve achieved, and I’m incredibly proud of our team. For me personally, I’m planning to stay. I love Yahoo, and I believe in all of you. It’s important to me to see Yahoo into its next chapter.
As we work to close this agreement in Q1 2017, it’s more important than ever that we come together as one global team to continue executing on our strategic plan through the remainder of the year. We have delivered the first half of the year with pride, achieving our goals. Now, it is up to us to make Yahoo’s final quarters as an independent company count.
Yahoo is a company that changed the world. Now, we will continue to, with even greater scale, in combination with Verizon and AOL.
This story is taken from Mashable and is written by Jason Abbruzzese.