Verizon buys Yahoo for $4.8bn – 5 reasons it’s actually a good idea
US telecoms giant Verizon Communications has snapped up the ailing web pioneer Yahoo for the sum of $4.8 billion (around £3.6bn).
America’s number one mobile network has moved quickly to tie up the deal, which was heavily rumoured towards the back end of last week.
Once valued at $125 billion during its peak time around the turn of the century, today’s deal for the 22-year-old represents a staggering fall from grace as Yahoo struggled to keep pace with Google or adapt to the advent of the social media era.
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The deal sees Verizon acquire Yahoo’s real estate portfolio as well as all of its online operations. It doesn’t include Yahoo’s share in Chinese firm Alibaba, most of Yahoo’s patents, or its cash holdings.
The deal represents the end for another early web pioneer, with Verizon also choosing to buy the floundering AOL Last year. While this perhaps another sad day for web traditionalists, for Verizon, the acquisition of Yahoo is actually a prize. Here’s why spending all that dough on an fading star is actually a great idea.
Yahoo has 1 billion users
Even with its value and revenue dropping considerably, Yahoo has maintained a relationship with 1 billion people. Indeed 225 million people still pick their email through the company. With so many people accessing those services from their Verizon mobile devices there the network will be keen to pull in that juicy ad revenue. In 2015, Yahoo earned $3.28 billion from selling advertisements. Even with a projected fall this year, it shouldn’t take Verizon too long to recoup the acquisition costs.
America’s largest mobile network has 140 mobile subscribers. The vast majority of which are using those smartphones to take photos day after day after day. Interestingly, Verizon now also owns Flickr, one of the most popular photo-sharing services on the web, which was purchased by Yahoo back in 2005. Can you see the opportunity here?
It gives Verizon a footing in content
Say what you will about Marissa Mayer’s reign as Yahoo CEO, she made the company relevant as a place for original content, beyond the floundering search business. Yahoo News is a respected name, boasting some of the most respected journalists in the nation. The sports coverage is up there with any mainstream source and as an NBA Fan, I wouldn’t be without The Vertical.
With Yahoo also emerging as a place to live stream sports following its exclusive deal with the NFL last year (Twitter has the honours in 2016), Verizon is perfectly placed to expand upon that. The network already has an NFL app that offers subscribers access to content, but more exclusive live events could be on the horizon.
That’s not to mention the $200 million Yahoo brings in a year from its Fantasy Sports products. With Verizon pushing this content, subscribers will be chowing down more and more of that juicy data.
AOL + Yahoo is greater than the sum of its parts
Verizon also owns AOL, which it bought for $4.4 billion last year. Judging by reports today, it appears as if the AOL CEO Tim Armstrong is going to be handling Yahoo too. Whether it’s a straight up joining of the two companies remains to be seen, but together they certainly have a better shot of challenging Facebook and Google than they did apart. Facebook and Google content discovery around the world right now through search and sharing, but together Yahoo and AOL can certainly increase their reach to the 2 billion users Armstrong is currently targeting.
Everyone’s into chat bots these days, Microsoft, Facebook, Google, the lot. Indeed, so is Yahoo. Just last week the company launched a host of chatbots for Facebook Messenger. Users can message @YahooFinance, @YahooNews or @YahooWeather to get the latest stock prices, news headlines and weather forecasts (including Flickr photos). As a mobile network with 140 million subscribers, it seems Verizon might leverage our robot underlings in terms of dealing with customers.
Do you agree with Chris? Is there still value in Yahoo in this day and age? Or has Verizon just piddled $5 billion up the wall? Share your thoughts below