By Kelly Liyakasa and Zach Rodgers
Verizon emerged victorious in the bidding contest for Yahoo, snapping up the media and technology assets of the still huge if perpetually down-at-the-heels digital media giant for $4.8 billion.
The deal, officially announced Monday, dramatically extends the carrier's addressable audience, adding 600 million monthly active mobile users that will support the company's cross-device advertising ambitions.
Verizon CEO Lowell McAdam said in a statement: “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.”
And Tim Armstrong, CEO of Verizon-owned AOL and a key architect of the deal, said: "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.”
"Powerful competitive rival" is of course a reference to the Facebook-Google hegemony in the mobile advertising arena, an area where ad spend is expected to dramatically grow in the coming years.
By buying Yahoo, Armstrong and Verizon are extending their bet that advertisers and publishers are uncomfortable enough with the concentration of power in two companies' hands that there is an opportunity for a third player to carve out a sizable share of the market.
In announcing the deal, the companies called out Yahoo's ad platforms – in particular the video exchange BrightRoll, mobile analytics platform Flurry and Gemini for native. These will be added to AOL's own ad tech stack. The companies have a job ahead integrating the technologies and deciding which brands to keep.
In a Tumblr post, Yahoo CEO Marissa Mayer announced plans to stay with the company.
"Yahoo is a company that popularized the Internet, search, email and real-time media," Mayer said early Monday on a call addressing analysts and investors. "We built our MaVeNS (mobile, video, native and social) businesses from nothing in 2011 to $1.6 billion in GAAP revenue in 2016 and generated over $1 billion in mobile advertising dollars last year."
Mayer added that Yahoo's ad tech trifecta of Flurry, BrightRoll and Gemini and "premium content brands" in the form of Yahoo Finance, Sports and News, stand to benefit most from Verizon's network and portfolio.
"We saw a high level of interest from multiple entities, [but] Verizon believed in our vision most," Mayer said, alluding to the digital company's longstanding flirtation with buyers over the course of the past year.
"Verizon is one of the largest mobile, broadband and Internet [services provider] and [we see the opportunity to become] the top global, mobile media company."
Wall Streeters asked Mayer what immediate implications there are on Yahoo's advertising offering, and whether there are clear revenue synergies.
Mayer noted Yahoo's predominant four ad formats - search, banners, native/mobile and video - apply to AOL's own ad business, as well.
"Yahoo has a lot of reach and scale with incredible audience reach," she said. "When we look at our programmatic offerings, especially with native, mobile and video, AOL has a great platform for [those as well]. We see more opportunities [for] targeting and the [application of] our data with Verizon."
One key issue for Yahoo was driving mobile engagement, in particular. Mayer called Yahoo's eight cornerstone applications (like weather, finance and sports) "beautiful," but said they needed greater distribution.
Consumers who use those products tend to use them that at great frequency, Mayer claimed, but she believes Verizon's mobile headway will give its own consumer-facing products a much-needed boost.
The deal is expected to close by the first quarter of 2017, subject to regulatory and shareholder approval. Until then, Yahoo will continue to operate independently. The transaction does not include Alibaba Group Holdings shares or stake in Yahoo Japan.