Verizon Media sold to private equity firm for US$5bn, to be renamed Yahoo

Verizon Communications is selling Verizon Media to private equity firm Apollo Global Management for US$5 billion. Verizon will retain a 10% stake in the new company, which will be known as Yahoo at close of the transaction and continue to be led by CEO Guru Gowrappan. Verizon Media comprises iconic brands such as Yahoo and AOL, as well as adtech and media platform businesses. 

According to Verizon, the sale will allow Verizon Media to "aggressively pursue growth areas" and stands to benefit its employees, advertisers, publishing partners and nearly 900 million monthly active users worldwide. Under the terms of the agreement, Verizon will receive US$4.25 billion in cash and preferred interests of US$750 million. News of a potential sale for Verizon Media first surfaced last week, after its parent company failed to grow the business to compete against the likes of Facebook and Google. Verizon Media posted a 10.4% year-on-year revenue increase for the first quarter of this year to US$1.9 billion, fuelled by strong ad trends growing by 26% YoY, as well as revenue from owned and operated platforms growing 13% YoY. MARKETING-INTERACTIVE understands that it is business as usual globally.

Gowrappan said the past two quarters of double-digit growth have demonstrated its ability to transform its media ecosystem. "With Apollo’s sector expertise and strategic insight, Yahoo will be well positioned to capitalise on market opportunities, media and transaction experience and continue to grow our full stack digital advertising platform. This transition will help to accelerate our growth for the long- term success of the company," he added.

Meanwhile, Apollo's senior partner and co-head of private equity David Sambur said it is big believers in the growth prospects of Yahoo and the macro tailwinds driving growth in digital media, advertising technology and consumer internet platforms. "Apollo has a long track record of investing in technology and media companies and we look forward to drawing on that experience to help Yahoo continue to thrive," he added.

Verizon's CEO Hans Vestberg added that Verizon Media has done "an incredible job" turning the business around over the past two and a half years and the growth potential is enormous. "The next iteration requires full investment and the right resources. During the strategic review process, Apollo delivered the strongest vision and strategy for the next phase of Verizon Media. I have full confidence that Yahoo will take off in its new home," he added.

AOL was acquired by Verizon in 2015 for US$4.4 billion to drive its LTE wireless video and OTT strategy. A year later, Yahoo was acquired by Verizon for approximately US$4.83 billion. According to former CEO Lowell McAdam, the acquisitions were meant to accelerate its revenue stream in digital advertising and place the company in "a highly competitive position" as a global mobile media company. However, Verizon's ambitions in the media and online space were slow to take off.

When the Yahoo acquisition was finalised in 2017, Verizon combined it with AOL to form Oath, which included HuffPost, Yahoo Sports, AOL.com, MAKERS, Tumblr, BUILD Studios, Yahoo Finance, and Yahoo Mail, among others. While Oath was expected to hit an annual revenue of US$10 billion, the Wall Street Journal previously reported that the business fell short of expectations. In 2018, Verizon booked a US$4.5 billion accounting charge related to Oath, a sign that its gamble on Internet properties had not panned out well, WSJ said.

Photo courtesy: 123RF

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