Verizon could boost Yahoo ad targeting, but challenges ahead

Verizon Communications, the largest USA wireless communications service provider, was set to acquire Yahoo’s ailing core internet business for about $4.8 billion with the opening of the United States stock market on Monday.

Verizon had expressed interest for a while in combining Yahoo’s enormous online audience with AOL, which the telco acquired past year for $4.4 billion.

What’s left for Verizon Inc., which includes Verizon Wireless, arguably the No. 1 USA wireless operator, to grab are Yahoo’s search, email and messenger assets and advertising technology tools, which made Yahoo a major player in the early days of the internet.

The deal comes about two years after Starboard began campaigning for changes at Yahoo.

The sale does not include Yahoo’s cash, its shares in Alibaba Group, shares in Yahoo Japan, Yahoo’s convertible notes, certain minority investments or Yahoo’s non-core patents.

And Mayer envisions a place for herself at Yahoo, helping expand the mobile reach of its properties through Verizon’s network of 112.6 million subscribers.

With 225 million users worldwide, “they would be really foolish to do anything to mess that up at least in next six to 12 months”, said Randy Giusto, lead analyst at Outsell.

At the time of this article, Yahoo! carried a $36.9 billion market cap.

Following the sale, the company will be left with about $41 billion it invested in the Chinese e-commerce company Alibaba as well as Yahoo Japan.

Mayer is unlikely to survive the acquisition but is likely to get a big payout even though she failed to turn things around in her four years in the top job at Yahoo!

Yahoo hired Mayer, a former Google executive, as CEO in 2012 with a mandate to engineer a turnaround, but her strategy to focus on mobile, video and social content could not revive the company and reverse its sagging stock price.

On a conference call with analysts after the announcement, Mayer repeated that line before adding, “A lot of the integration discussions are still ahead of us”.

The sale puts an end to Yahoo’s 21-year history as an independent company.

But Verizon appeared to be the leading candidate because of its ability to integrate AOL’s advertising technology into Yahoo services.

“I plan to stay”, Mayer said after the deal was announced.

According to documents filed with regulators, Mayer would get a severance package of United States dollars 55 million if removed within a year of a change of control.

The company was founded in 1994 by two Stanford University students, Jerry Yang and David Filo, as “Jerry and David’s Guide to the World Wide Web”.

“The Yahoo brand still holds a lot of consumer-affinity” and could help Verizon overcome the lukewarm feelings that many subscribers have toward their wireless service providers, said Forrester Research analyst Shar VanBoskirk.

But most of that money has flowed to Google and Facebook, two companies that eclipsed Yahoo during its long slide from a sensation to a dysfunctional also-ran.