Why Did Verizon Pay $4.8 Billion for Yahoo

US telecommunications giant, Verizon Communications Inc. acquires Yahoo! Inc.’s core assets in a $4.8 billion deal, expanding the size of Verizon’s digital advertising.  

Yahoo is an ‘iconic pioneer’ of the web, with the objective of connecting users with the world wide web. In the past decade, Yahoo has been struggling to compete with Alphabet Inc.’s Google – a platform with 78% of global searches, a market share 16x larger than Yahoo! (Internet Live Stats).

Yahoo! reported a loss of $440 million in its second quarter earnings release, a loss almost 10x larger than the same period last year. The company struggled to find a buyer as the losses continue to get deeper, amid strong competition, and the sell off of real estate assets. Back in February, Verizon’s chairman and CEO Lowell McAdam confirmed that the company is interested in acquiring Yahoo (CNBC).

During the second quarter earnings release, Yahoo! reported a 5.2% increase in total revenue – mostly as a result of auctioning off core business, such as the recent sale of the Santa Clara real estate, providing $246 million in net cash proceeds.





Yahoo!’s CEO (and former Google employee), Marissa Mayer  started in July 2012, as the company’s 5th CEO in four years (Bloomberg). Mayer replaced the former interim CEO Ross Levinsohn. Levinsohn took over the company after Scott Thompson resigned, due to inaccuracies in his academic record.

Yahoo! repeatedly struggled internally, and externally in terms of growth. This company was once valued at $125 billion during the dot.com boom (BBC), and has never returned anywhere near that value 15 years later.

Yahoo! continuously looked into different strategic objectives, and Marissa Mayer made unsuccessful attempts to grow Yahoo! Verizon has been involved in over $170 billion worth of communications mergers & acquisitions in the past decade (Bloomberg). The acquisition of Yahoo! Is expected to double the size of Verizon’s digital advertising.

After the acquisition, Verizon’s digital advertising will be third place, behind Google and Facebook, in a $180+ billion market  (Bloomberg). It can be suggested that Verizon aims to leverage on the purchase of Yahoo! in order to compete with industry leaders.

This strategic merger & acquisition deal consists of Yahoo’s real estate assets, and intellectual property. After the acquisition, Yahoo will have its stake in Alibaba Group Holding Ltd., and Yahoo Japan Corp. – a total value of approximately $40 billion (Bloomberg).

Yahoo! (NASDAQ: YHOO) closed at $39.38 (+1.36%) and Verizon Communications Inc. (NYSE: VZ) closed at $56.10 (+1.32%) during Friday’s trading.

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Writer: Jelani Smith 

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