Verizon set to buy Yahoo for $5 bn, beating AT&T

Verizon 4G networkTelecom network operator Verizon Communications is set to buy digital media company Yahoo for a price close to $5 billion, Bloomberg reported.

The deal will include Yahoo’s core internet business, and doesn’t include the Internet media company’s patents at this stage. There is no confirmation from both Yahoo and Verizon.

A deal with Verizon will ensure the exit of Yahoo CEO Marissa Mayer, who could not revive the internet company. She will receive a handsome package before leaving the digital media company.

Apart from Verizon, AT&T and Quicken Loans founder Dan Gilbert, as well as buyout firms Vector Capital Management and TPG were active in the bidding process until the end, Bloomberg reported.

Verizon sees a complimentary set of businesses that could find a home alongside its AOL properties. Verizon aims to add video business to support its wireless offerings. Steve Vachon, research analyst at TBR, in a note in April said that Verizon Wireless is transitioning from serving solely as a telecom carrier and is venturing to compete as a heavyweight within the digital media market.

With the wireless industry maturing, Verizon has been buying up internet and advertising technology companies, including AOL, and presenting itself as the best bet to take on Google and Facebook in mobile advertising.

Yahoo has millions of users, a collection of websites including Flickr, Tumblr and Yahoo Finance and Sports and some useful digital-ad tech like Flurry and BrightRoll. Together with AOL, the new Yahoo under Verizon may have a better chance of competing in a digital advertising market dominated by two big players.

Verizon to become strong in digital media biz

The US-based telecom carrier is vigilant in acquiring assets to complement its and go90 businesses, which is equipping Verizon to contend with competitors in the media space such as social media companies and OTT video providers, said Steve Vachon, research analyst at TBR.

Verizon has made numerous acquisitions to expand its ad tech capabilities and content library in recent months, though the carrier’s central media platform, go90, will take at least two years to become a profitable business. Continued investments will be needed to grow go90 into a viable alternative to prominent services such as YouTube, which will limit the capital the company has to spend on enhancing its wireless and wireline networks.

Verizon is monetizing go90 exclusively through advertising revenue, as the carrier is providing “data free” service streaming to its customers. Investments in content producers such as Complex Media and AwesomenessTV provide Verizon exclusive content to draw in millennial viewers, but the carrier will remain challenged in differentiating go90 from the wide scope of mobile video programming offered by T-Mobile’s Binge On service and AT&T’s DIRECTV streaming packages that will become available later in 2016.

Verizon is also targeting acquisitions that enhance the carrier’s capabilities in delivering Internet-based video. The Volicon acquisition, announced in March, assists broadcasters to deliver content in an OTT format. Conversely, technology acquired from the 2014 purchase of OnCue will provide the backbone for a speculated IP-based pay-tv service that will launch later in 2016.

This deal will expand Verizon’s advertising base by 200 million more visitors. Yahoo will be a large driver of the advertising engine. They also can collect a whole lot more user data to make the ads more relevant. They will be in more places with better ads.

Baburajan K
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