Yahoo is selling its core business to US telecoms giant Verizon, in a deal worth $4.8bn (£3.7bn), as it looks to build a mobile ad business that can rival Google and Facebook.
The deal, which is set to close in early 2017, will include Yahoo’s core internet business, homepage, email services and news. Yahoo’s other assets including its stakes in Alibaba and Yahoo Japan will continue to be owned by Yahoo shareholders, with the investment vehicle changing its brands.
The move comes after Verizon’s acquisition of AOL last year and is something Yahoo CEO Marissa Mayer perceives as an opportunity to push Yahoo’s mobile business, which currently includes 600 million monthly active users.
“Yahoo and AOL popularised the internet, email, search and real-time media. It’s poetic to be joining forces with AOL and Verizon as we enter our next chapter focused on achieving scale on mobile.”
Marissa Mayer, CEO, Yahoo
Verizon will likely try and combine both acquisitions and tap into Yahoo Finance users to compete with Google and Facebook on digital ads.
However, the deal comes after a turbulent few years for Yahoo, which has struggled to maintain relevance in a rapidly evolving market. Having once been the go-to destination for internet users, it has since been surpassed by search engines such as Google and social networks like Facebook. Although Yahoo still has more than one billion monthly active users, revenues have been falling, down 20% in Q2.
And despite Yahoo chief financial officer Ken Goldman claiming that Yahoo is “one of the most iconic and universally well-liked companies across the world”, its brand is also falling behind competitors. YouGov’s Brand Index shows that Yahoo’s index ranking (a measure of a range of metrics including quality, impression and reputation) has fallen over the past year to 3.8. Google by comparison has a score of 35.8.
Nevertheless, the Yahoo brand has awareness of around 90% and more brand love than the majority of telecoms providers. Shar VanBoskirk, vice-president and principal analyst at Forrester, believes that despite the “wobbliness” of Yahoo’s brand identity, the Yahoo brand still holds a lot of consumer-affinity.
“Depending on how Verizon plans to leverage that, it could be a nice boost in an industry like telecoms where most subscribers disdain even the providers they are quite loyal to,” she says.
The deal also gives Verizon access to customer data, meaning it can be more targeted with its advertising. “This allows Verizon to create better ad products which are competitive against primarily online giants such as Google, and creates a better user experience which is competitive against other cable and telecom providers,” explains VanBoskirk.
Mayer will continue with her role as CEO at Yahoo for the foreseeable future, though it is unclear at this point whether this is just until the completion of the acquisition.
“For me personally, I’m planning to stay. It’s important to me to see Yahoo into its next chapter,” she wrote in a blogpost.