Yahoo acquisition fuels global ambitions
Verizon Communications has sealed a deal with Yahoo, agreeing to buy the troubled internet portal’s operating assets for $4.83 billion in cash. By combining Yahoo with AOL, which it bought last year, Verizon said it will reach more than 1 billion monthly active users and create a “new rival in mobile media technology.”
The combination of Yahoo and AOL will give Verizon an attractive platform for advertisers, particularly if it can drive more of its mobile subscribers to these websites. U.S. carriers are well aware that content delivery services that ride “over the top” of their networks generate higher profit margins than the networks themselves. Verizon has entered the content delivery business with its Go90 mobile video unit, and is now acquiring more content with the Yahoo purchase.
“Yahoo has been a long-time investor in premium content and created some of the most beloved consumer brands in key categories like sports, news and finance,” said AOL CEO Tim Armstrong in a statement.
Armstrong has a history with Yahoo, and with its CEO Marissa Mayer. Mayer and Armstrong both worked at Google when it was still a young company, and after Armstrong became CEO of AOL he reportedly tried to merge AOL with Yahoo, but was rebuffed by Mayer.
Verizon will consolidate AOL and Yahoo under the leadership of Marni Walden, EVP and president of the product innovation and new businesses organization at Verizon. Walden is a proponent of the promise of digital video and played a key role in Verizon’s recent acquisition of a 24.5% stake in AwesomenessTV, which is controlled by Dreamworks Animation.
Verizon CEO Lowell McAdam said today that the Yahoo purchase builds on the company’s strategy of creating “cross-screen” connections for advertisers, meaning that Verizon wants to connect advertisers to audiences on mobile devices, desktop computers and possibly TV screens or connected car displays.
“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,” said McAdam in a statement. His description of Verizon as a “global mobile media company” highlights Verizon’s effort to grow its business in markets outside the United States. Yahoo gives Verizon another way to do business in countries where it does not own spectrum.
With more than $5 billion in cash on its balance sheet at the end of the first quarter, Verizon appears well positioned to take the acquisition in its stride. But the company may need to raise more capital in the near future, as a cash purchase of Yahoo could leave it with less dry powder when it comes time to purchase the 600 megahertz spectrum that the government is expected to make available later this year.
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