Verizon (NYSE: VZ) is doubling down on its bet in digital media, announcing this morning that it will spend $4.83 billion to acquire Yahoo's core online business.
The nation's largest mobile operator, which had long been viewed as the favorite to win the Yahoo sweepstakes, will integrate Yahoo with the AOL business it acquired last year for $4.4 billion. AOL is overseen by Marni Walden, Verizon's EVP and president of the Product Innovation and New Businesses organization.
Yahoo CEO Marissa Mayer will reportedly remain with the company – for the time being, at least -- although reports indicate she likely will not be given a prominent role. The deal is expected to close in the first quarter of next year.
"We have enormous respect for what Yahoo has accomplished: This transaction is about unleashing Yahoo's full potential, building upon our collective synergies, and strengthening and accelerating that growth," AOL CEO Tim Armstrong said in a prepared statement. "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."
Indeed, Yahoo's web assets are a good fit for Verizon, which is looking to leverage media properties such as AOL's Huffington Post, Engadget and TechCrunch, as well as its Go90 video offering. The carrier's subscriber base provides a massive distribution channel that can be used immediately, providing a way to further monetize subscribers. And Yahoo's high-profile brand and large audience opens the door for Verizon to ramp up its OTT efforts.
Yahoo generated $2.83 billion in net digital ad revenues worldwide last year, according to eMarketer data, claiming 1.5 percent of the global market. Roughly 600 million users access its mobile websites and apps per month, and Yahoo owns Flurry, a respected app analytics firm.
The acquisition centers on a mobile video market where Verizon has yet to make much of a dent, UBS observed in a research note to subscribers. Verizon continues to pursue the market with Go90, an OTT offering aimed primarily at millennials, but the app hasn't emerged as a threat to heavyweights such as YouTube and Netflix. Adding Yahoo to its growing media empire may eventually pay dividends for Verizon, UBS predicted, but it isn't likely to open the floodgates for new revenue anytime soon.
"Consumer interest in Go90, Verizon's mobile video portal, has been tepid," UBS analysts wrote. "Meanwhile, trends at Yahoo have been difficult, with the company losing share of mobile ad dollars to the heavy weights (Google, Facebook, etc.)…. While this deal will barely move the growth or margin profile of Verizon, synergies over time could provide upside to earnings."
Verizon hires former YouTube exec for Go90
Report: Verizon, AT&T preparing for final round of bidding for Yahoo
UBS: Verizon's Go90 faces 'an uphill battle' against other mobile video and social apps
Verizon's McAdam on Go90: 'It did get a little bit overhyped'
AT&T announces three DirecTV-branded video services for all devices, will launch in Q4
Verizon and Hearst to target millennials with made-for-mobile video