Verizon Buys Yahoo: 8 Things You Need to Know
Verizon Communications Inc is purchasing global iconic, but stalling Internet company, Yahoo for U S$4.83 billion. The transaction helps Verizon to add scale to its already impressive digital media and ad-tech assets. 8 things marketing and media professionals need to know....
1. What is Verizon buying?
Verizon Communications Inc has finally closed a deal to buy Yahoo Inc core business, including Yahoo's operating business and patents except Yahoo's valuable stake in Chinese firm Alibaba.
2. With which Verizon properties will Yahoo be combined with?
Yahoo will be combined with AOL, which Verizon bought last year.By adding Yahoo's core internet business, with more than a billion Internet users a month, to AOL, Verizon becomes a global digital media player. Verizon (AOL), gains access to Yahoo's advertising technology tools, as well other assets such as search, mail, messenger and real estate.
3. Will Yahoo cease to exist?
The Yahoo brand will very likely survive as part of Verizon/AOL, but the sale marks the end of Yahoo as an operating company, leaving it only as the owner of a 35.5 percent stake in Yahoo Japan, as well as its 15 percent interest in Chinese e-commerce company Alibaba Group Holding Ltd. When the transaction is closed, in the first quarter of 2017, Yahoo will change its name and become a publicly traded investment company, the company said.
4. What strategy is Verizon following with the Yahoo purchase?
"Combining Verizon, AOL and Yahoo will create a new powerful competitive rival in mobile media, and an open, scaled alternative offering for advertisers and publishers," said Tim Armstrong, AOL chief executive, in a statement. A key word Armstrong is using is "open", with that he stresses the contrast between Verizon/AOL/Yahoo;s approach with the so-called "walled garden" approach of Facebook and other social media properties as well as Google, which for a long time has built a whole digital ecosystem around it. Through the scale Verizon's digital media properties have gotten through the Yahoo and AOL acquisitions, Armstrong attempt to compete with Google (including Youtube) and Facebook, which in many sectors of the digital ad market have a share higher than 75% (e.g. online video). (Note also that AOL last year signed a global ad monetization agreement with Microsoft for its MSN network.) Another important word in Armstrong's statement is "mobile": As one of the largest wireless and cable companies in the world, Verizon opens the door to extensive distribution opportunities of Yahoo content.
5. Does Verizon's foray into the digital media business hide something?
It is no secret that market forces are not shaping up to be kind to traditional wireless carriers like Verizon. The explosion of third-party messaging apps severely dented one of wireless carriers' biggest revenue streams - text messaging. WiFi expansion projects by Google and other third parties makes it much easier to go with a smaller data plan. Perhaps one day the idea of paying for wireless data will be a relic. Verizon needs to diversify in the face of a changing economy. Perhaps's ad supported mobile phones will prove to be a good alternative to declining revenues coming from data plans.
6.Who will be in charge of integrating AOL and Yahoo?
Verizon executive Marni Walden is likely to be in charge of mashing together Yahoo and AOL — which Verizon acquired last year — and make hay out of two old tech giants, Business Insider reports. As Verizon's executive vice president and president of product innovation, Walden is in charge of evolving Verizon from an analog business into a firm that can battle with the digital media giants and explore new technology like the Internet of Things and telematics. Marissa Mayer, chief executive of Yahoo, said that she was "planning to stay" in the company.
7. Does the word "synergies" also mean headcount cuts?
No doubt, the merger between Verizon/AOl and Yahoo comes associated with cost saving opportunities in several areas (back office, ad operations and even sales). “Synergies” can be an unnerving word for employees of both acquirers and acquisition targets because it almost always involves the closing and combining of offices, which also means the reduction of headcount. Yahoo reported that active headcount stood at 8,800 at the end of the quarter, down from 11,000 a year ago. This is the lowest level in a decade. Analysts have attributed Yahoo’s better-than-expected earnings to such cost-cutting measures.
8. What implications does it have for the U.S. Hispanic market and Latin America?
Yahoo has U.S. Hispanic specific products and sales teams, while AOL has folded most of the Hispanic specific properties into its larger general market websites (e.g. Huffington Post). It will be interesting what strategy the combined AOL/Yahoo will follow. In Latin America, Yahoo recently closed its Argentina and Mexico offices only clearly betting on Brazil. AOl, which in the early 2000s had Spanish-Speaking U.S. Hispanic and Latin American units, has followed a similar strategy. The big questions are whether the combined AOL will expand into Spanish-speaking Latin America (Colombia, Mexico, Argentina etc) and whether there will more of a total market (millennial) strategy for the U.S. Hispanic market or not.