Verizon CEO Lowell McAdam finally confirmed that they’re buying Yahoo for $4.83 billion in cash. After they close the deal at the end of the year one of the largest telecommunications company will officially acquire all Yahoo’s web assets. Here’s what you need to know about this megamerger of the year:

 

Yahoo as we know it is deader than dead

Loss of Yahoo independence is a result of a series of missteps of its leaders. Yahoo was one of the pioneers of the Internet industry, but lack of focus of quickly changing chief executives, failures in dealmaking led to diminishing of the brand. Rejection of Microsoft’s $45-billion offer in 2008 was one of the most unfortunate and shortsighted strategic decisions they’ve ever made.

After financial crisis, their revenue reduced and the company continued losing its competitive edge to Google and Facebook. After years of struggle in finding the right strategy, Yahoo had to give up and sell its operating business at a much lower price. However, this huge transformation might lead Yahoo to incredible progress in all mobile, advertising and social media. The chief executive of Yahoo Marissa Mayer is planning to stay and see what awaits Yahoo, but there’s no final decision about her role at the company yet.

Yahoo Nasdaq

 

There was a pretty wide list of bidders, but Verizon prevailed

This April, when Yahoo announced that their business is up for sale, there were around 40 buyers that expressed an interest in its assets. However, not all of them were able to withstand a competition. Verizon was in the front row of strong contenders along with AT&T, TPG, Vector Capital Management and some others. One of the reasons why Verizon seemed a preferable buyer of Yahoo is because of its willingness to transform itself into a media company and monetize in digital advertizing business. Another reason of its success is that Verizon more likely would want to add its assets to their own portfolio, willing to boost media efforts, while with private equity firms that would definitely sell Yahoo piecemeal.

 

Sale includes Yahoo’s operating business, but what does this really mean?

Here’s what exactly Verizon will be dealing with after closing this deal:

  • Yahoo’s core assets, which include search and mail, advertising and media brands;
  • Yahoo’s real estate value around $1 billion worth;

Yahoo’s cash and its shares in Alibaba or Yahoo Japan as well as the company’s non-core patents  weren’t a part of the deal.

 

Verizon needed Yahoo’s core assets for a reason

Last June Verizon owned the AOL company with all its content sites and ad tech assets, which gave them more distribution and scale. This well-though-out decision proved that Verizon will never be one of those telephone companies that only take part in content transmission. They’re willing to be a part of something bigger by creating a “global multiscreen network platform”, as they say. Purchasing the AOL company wasn’t enough for them to grow a larger business, but with the acquirement of Yahoo they now have an opportunity to compete for users with Google and Facebook in online advertising. Once Verizon joins the forces of the ad tech of AOL with Yahoo’s content assets its digital advertising revenues has all the possibilities to increase.

 

A new and competitive media empire is Verizon’s next big goal

Verizon will complete the deal at the end of 2016 – the beginning of 2017, so it’s maybe too early to talk about certain operational plans. However, it isn’t a secret that Verizon is determined to become  a new rival in mobile media technology”. With acquisition of Yahoo and combining its assets with the AOL company they’re closer to achieving this goal than they’ve ever been. With Yahoo’s largest scale of $1 billion users, its content and advertising business Verizon will be able to enhance their mobile offering and create new revenue streams.

So, is it the end of an era? For Yahoo as a tech giant it is. Well, we continue to use its services as we did before, but the company itself will go through major changes when it will finally be a part of Verizon. For an access provider the acquisition of Yahoo’s assets is a bold move in direction of digital media and advertising business. Now that Verizon has this new “weapon” it can become a strong player and compete with titans like Google and Facebook.

However, they won’t just sit back and wait to see what happens, they will look for ways to fight down. As CEO Lowell McAdam said, “the market is going to grow dramatically”, and if Verizon will figure out how to strengthen its positions in a content and advertising business, it will be the greatest example of a successful telecommunication company transformation into a tech conglomerate to remember.

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