Verizon is buying Yahoo for $4.83 billion

Following several rounds of bidding and rumors this weekend, it was confirmed this morning that Yahoo is being acquired by Verizon for $4.83 billion. In 2015, Verizon acquired AOL for roughly $4.4 billion.

Effectively, AOL and Yahoo will be merging, a deal once proposed by AOL’s CEO Tim Armstrong but rejected by Yahoo. Here’s what the combination offers Verizon:

The addition of Yahoo to Verizon and AOL will create one of the largest portfolios of owned and partnered global brands with extensive distribution capabilities. Combined, AOL and Yahoo will have more than 25 brands in its portfolio for continued investment and growth. Yahoo’s key assets include market-leading premium content brands in major categories including finance, news and sports, as well as one of the most popular email services globally with approximately 225 million monthly active users. Additional technology assets in the advertising space include Brightroll, a programmatic demand-side platform; Flurry, an independent mobile apps analytics service; and Gemini, a native and search advertising solution.

According to the press materials, the sale “does not include: Yahoo’s cash, our shares in Alibaba Group Holdings or Yahoo Japan, Yahoo’s convertible notes, certain minority investments, and Yahoo’s non-core patents (called the Excalibur portfolio).” When the Verizon deal closes, those assets will trade under a different investment company name.

Yahoo was founded in 1994 and went public in 1996. In February 2008, Microsoft tried unsuccessfully to acquire the company for roughly $45 billion but a year later acquired its search business, which probably marked the beginning of the end for the Sunnyvale, CA, company.

Verizon says that “Yahoo will be integrated with AOL under Marni Walden, EVP and president of the product innovation and new businesses organization at Verizon.” Although it has not yet been formally announced, Yahoo CEO Marissa Mayer will likely leave the company with a lucrative package.

The challenges of integrating AOL and Yahoo successfully will be substantial. Whether Verizon, a telecom company, can grow (or maintain) the value of the Yahoo-AOL portfolio also remains to be seen.

There will be an investor call at 8:30 Eastern. We’ll listen in and update this post with any new information.

Notes from the investor call:

Overall, the call focused heavily on financial and tax questions and less on strategic issues or how Yahoo would integrate with AOL and Verizon. There was also only one question regarding advertising, which yielded a very general answer.

Yahoo CEO Mayer opened the call with thank-yous and a review of the company’s accomplishments during her tenure. She also thanked employees for their dedication.

Mayer said, “Verizon believed in our vision the most” — and apparently offered the most money for the company. She promoted the opportunity for Verizon and how Yahoo would help it realize an ambitious 2020 vision.

CFO Ken Goldman discussed the separation of the operating business from the company’s stake in Alibaba and Yahoo Japan, as well as a number of technical-investor issues. He says the management team “collectively loves this company.”

Many of the analyst questions concerned financial aspects of the deal and its implications, the retained Yahoo assets not going to Verizon (Alibaba, Yahoo Japan, 4,000 patents) and tax issues. There was also considerable related discussion of the status of “RemainCo” as a public company.

There was some general discussion about how the Verizon-AOL-Yahoo combination would improve “synergies” for advertisers; nothing very specific.

Apparently, there’s considerable interest in Yahoo’s patent portfolio, according to the company, which is partly why it wasn’t included in the Verizon deal.

The Yahoo small business assets will reportedly go with the Verizon deal.

Regarding how Yahoo will “leverage Verizon’s mobile distribution,” Mayer said, “We have beautiful mobile products . . . it’s about how we get those products in front of mobile users. Verizon can be very helpful there.”

About The Author

Greg Sterling

Greg Sterling is a Contributing Editor at Search Engine Land. He writes a personal blog, Screenwerk, about connecting the dots between digital media and real-world consumer behavior. He is also VP of Strategy and Insights for the Local Search Association. Follow him on Twitter or find him at Google+.