What’s The Big Deal About Verizon-Yahoo Deal?

When news of Verizon acquiring Yahoo! for USD 4.6 billion was announced, the industry just stifled a yawn.


When Facebook acquired Whatsapp for USD 19 billion in 2014, a few eyebrows were raised. Reports of Microsoft deciding to gobble up Linkedin.com for USD 26 billion too made us sit up and take notice. However, when news of Verizon acquiring Yahoo! for USD 4.6 billion came along, the industry just stifled a yawn.

And, with good reason as about the only thing that appeared exciting with the Yahoo! story in recent times was the exclamation mark that goes with the trademark title of the company. A company, that used to be once the Internet’s darling, valued at over USD 100 billion and with a fan following reminiscent of Hollywood’s biggest stars of all time.

What’s the Big Deal?

Media reports suggest that the deal will allow Yahoo to reside under the Verizon umbrella alongside AOL, that other innovator-turned-also-ran company which the telecom giant bought a year ago, ostensibly to gain a foothold in targeted advertising online.

AOL top boss Tim Armstrong (once a Google star) is slated to take over Yahoo’s assets and is hoping that they would prove valuable for advertisers. Pigs might fly! Analysts had predicted that Yahoo could earn at best about 1.5 percent of all digital ad revenues worldwide this year by selling on its websites. Of course, rates for these slots have fallen regularly as advertisers seek the mindshare of smartphone users.

In case you have any doubts about where a majority of these advertisement dollars are going? Don’t bother looking elsewhere – Google and Facebook are gobbling it all up! And websites like Snapchat and even Instagram have managed to pull out some share of that pie through crooking their fingers.

What Does Verizon Get?

Before venturing into this area, let us take a look at what United States’ biggest mobile network doesn't get? For starters, they do not get Yahoo’s stake in Alibaba.com and Yahoo Japan – the two entities that made up a lion’s share of the company’s recent valuations.

What Verizon does get as part of its USD 4.5 billion check is a bunch of media properties loosely held together as an entity but tied down in a much stronger fashion by the large user base of around a billion people. Besides Tumblr and Flickr, which Yahoo bought in recent times, the company also has a bunch of websites and services. In addition, there is Yahoo Mail, Search, News, Groups, Finance and Fantasy Sports – to name a few that one recalls.

All these made sense in an era (some years ago) when people actually approached the Internet with a preferred Home Page on their browser. Yahoo took over this position with élan and served up content to the eager consumers. Such a world appears Jurassic in today’s scenario where user behavior is far more fickle than London weather.

What Do The Leaders Say?

To the untrained mind, the deal appears to be rather drab, given that Yahoo boss Marissa Mayer had struggled without any great result for five years to resurrect the company. The best she could achieve was grow mobile revenues to a billion dollars per year, in addition to expanding Yahoo News.

What both Mayer and Armstrong jointly harped on post the deal was about ‘a new position for advertisers.” While Mayer believes that the new entity (combining Yahoo and AOL’s assets) would amount to a ‘must buy’ for advertisers, Armstrong believes that the merger will create a “new powerful competitive rival in mobile media, and an open, scaled alternative offering for advertisers and publishers.”

Mad Money host Jim Cramer agrees with this thought. He thinks that Verizon needs to maintain its lead over the competition “by offering subscribers more than just a wireless network,” Cramer was quoted as saying on the CNBC website (Read it here).

The thought that Verizon wants to enter into direct competition with Google for premium advertisers is something that others tend to agree with. The Washington Post quotes Rita McGrath, a professor at Columbia Business School, as saying that media properties of Yahoo and AOL would sit pretty under a single umbrella (Read it here).

The Final Analysis

While in theory, it appears that Yahoo and AOL can quietly get down to business of getting traction with its media bouquet that comprises such brands as Yahoo News and Huffington Post, the challenge remains as to how Verizon plans to get cutting edge technology to serve up these stories to the attention-deficient users.

As for Yahoo, the plight that it finds itself today is obviously a result of the inability of its top brass to decide whether it was a media company or a technology company. Google, Facebook and Apple decided that they were tech giants and have survived and thrived. Yahoo obviously missed the bus – the most recent being the olive branch offered by rival Microsoft to buy them out for USD 48 billion some years ago.

Today, they got sold for just ten percent of that amount and parked alongside another company in distress (AOL) in the Verizon garage.

Small wonder then that the only exciting part of the deal was the exclamation mark!

Image via fox61.com

TAGS: Verizon, Yahoo