Another Internet pioneer bites the dust, with news that wireless company Verizon is buying Yahoo for $4.83 billion—a tiny sum for a company once valued at $125 billion.
After five months of bidding, the sale was announced on Monday. It'll be the second old-school tech firm snapped up by Verizon in the last few months—it nabbed AOL for $4.4 billion last year.
Yahoo Inc. will be turning over everything that a consumer would recognize as being part of Yahoo—its email service, its websites dedicated to focused news coverage about topics such as finance or sports, and its advertising tools. The moves after activist shareholders, , increasingly agitated for either a major shakeup or sale in face of rapidly declining revenues. (As part of the bargain, Verizon will also get Yahoo's land holdings, though it had throughout the past 12 months.) , embattled CEO Marissa Mayer will not be joining the company, but is expected to receive a $40 million severance package—as always, it pays to be the boss. But —while Verizon exec Marni Walden seemed to indicate Meyer's
Regardless of whether Meyer comes with the acquisition or not, one thing remains with Yahoo's shareholders: The nearly $41 billion in holdings Yahoo still has in a few key companies, the key one being Chinese retail giant Alibaba, with a current market cap hovering around $210 billion.
In the mid-1990s and early 2000s, Yahoo controlled a huge share of online advertising. But two major setbacks that ended its dominance.
The first was the rise of Google, which used a much more sophisticated and speedier algorithm for determining search results, while also aggressively working up a sales team dedicated to placing ads directly on top of those search results. Yahoo attempted to keep people on Yahoo.com, trying to turn it into a one-stop shop weather, sports scores, or a place to buy airline tickets or tennis shoes, and make its money by placing banner ads on top of everything. Google only wanted to help users find what they were looking for fast, and then sell a small text ad alongside it, pocketing billions of dollars in targeted advertising along the way.
The second was Facebook which, after some initial stumbles, now allows for advertisers to target potential customers on a granular level that Yahoo could only dream of. Thanks to the wealth of information nearly every Facebook user willingly gives up to Zuckerberg and Co., an advertiser can efficiently target, say, females between the age of 25 to 34 who live in Boston, are fans of the "Scandal" and yoga, graduated college, like Dean & Deluca. They can then design an ad campaign just for them. And Facebook's massive user base means than even that targeted ad will will find thousands, if not hundreds of thousands, of eyeballs.
Of course, the other reason Yahoo is being sold off is unforced errors. The company famously turned down an offers to buy Google—twice.
It almost was able to buy Facebook in 2006, back when Facebook was just beginning to be seen as something more than a place to post pictures of totally gnarly beer bongs, but a drop in stock price scotched the deal.
In 2008, Steve Ballmer of Microsoft made an extremely aggressive bid to acquire The deal was ultimately rejected the deal as being too low.
Yahoo also acquired several thriving online communities—Tumblr and Flickr—and either or simply .
And CEO Marissa Mayer's hope that Yahoo could acquire and acquihire its way into growing revenues (as her previous employer Google has done somewhat successfully) simply never panned out. She bought , with names like Jybe and Zofari, but the companies themselves were largely shut down, with some of the founders being moved into different departments in Yahoo, and many more simply leaving.
Verizon's deal is expected to close in 2017's first quarter. It will be buying a company that still commands a tremendous number of eyeballs—its estimated it has . As web analytics firm Parse.ly pointed out, Yahoo .
The question is whether Verizon can find a way to take those raw numbers and turn them back into something that makes real money again.