Verizon closed its $4.48 billion purchase of Yahoo's core business Tuesday, finalizing a deal mired by two massive hacks affecting more than 1 billion Yahoo accounts and marking the latest play by telecoms to challenge Silicon Valley's dominance in online advertising.
Under a newly bolstered Verizon, Yahoo and AOL will combine as part of a new media and technology company called Oath. The sale of Yahoo was first announced last summer, with a $4.8 billion price tag. But just months later, the company disclosed a series of data breaches that compromised the personal information of potentially hundreds of millions of people. Following the breaches, Yahoo and Verizon eventually agreed to discount the purchase price by $350 million.
As part of the finalized deal, Yahoo chief executive Marissa Mayer will resign with a “golden parachute” worth just over $23 million in cash, equity and benefits, according to an SEC filing. She served at the company's helm since 2012.
And more than 2,000 employees will get laid off as Yahoo and AOL reorganize under Verizon's management, according to a person familiar with the matter.
Once the portal to the Internet, and a pillar of the technology industry, Yahoo has fallen in stature as other Web giants, chiefly Google and Facebook, have built sprawling business empires and amassed cultural cache extending well beyond southern California. Although no longer seen as the pioneering Internet company it once was, Yahoo's umbrella of websites, including Yahoo Finance and Yahoo Sports, commands a staggering amount of online traffic. Yahoo's Internet properties had nearly 200 million unique visitors in April, according to the analytics firm ComScore. Only Facebook and Google claimed more. Experts said it's this massive audience that attracted Verizon to Yahoo.
“Verizon stands to expand their audiences significantly,” said Susan Bidel, a senior analyst at Forrester Research. Bidel said that Verizon is positioning Oath as a platform for advertisers that connects them with large audiences and provides targeted information about the kinds of people they are reaching.
Verizon's purchase of Yahoo also continues its play for original online media. Through its $4.4 billion acquisition of AOL in 2015, Verizon owns HuffPost and TechCrunch. Folding in Yahoo's sites expands the reach Verizon can offer advertisers and amplifies the company's ability to tailor ads to specific users.
Like AT&T’s bid to purchase Time Warner, Verizon’s move also reflects a trend in the telecom industry for companies to wed their networking technology to exclusive content. “They want to have greater ownership to avoid the ultimate fear of being commodities, of being this dumb pipe,” said Walt Piecyk, a telecom analyst at BTIG. Armed with unique data about the browsing behavior of Internet users, companies such as Verizon and AT&T can also use that information to shape the formats of websites and videos, and serve more effective, pinpointed ads, he said.
Tim Armstrong, the former chief executive of AOL, will now lead Oath. “Now that the deal is closed, we are excited to set our focus on being the best company for consumer media, and the best partner to our advertising, content and publisher partners,” he said.