Verizon and Yahoo both benefit from $4.83bn takeover deal

Comment Martin Flanagan

Both US telecoms giant Verizon and fading online star Yahoo get something decent out of the mega $4.83 billion takeover of the latter yesterday. Verizon, after its $4.4bn takeover of AOL last year, continues its drive into online advertising, a less heavily regulated area than telecoms, and it will give the digital juggernauts of Facebook and Google food for thought.

With Yahoo, Verizon increases its projected digital ad revenues in the US from 1.8 per cent to 5.2 per cent. It is still well behind Facebook and Google, but the increase is enough to suggest a small horse coming up on the rails.

Meanwhile, Yahoo’s core business has had a somewhat rudderless feel in recent years, and few people have referred to it as an internet trailblazer for a long time. Now it gets access to Verizon’s deep pockets to build further distribution and accelerate its work in mobile, video and social media.

Yahoo put its core business up for sale in February after shelving plans to spin off its lucrative $33bn stake in Chinese e-commerce giant Alibaba because of the $10bn tax bill it might have faced.

The way the latest deal is structured, it is only Yahoo’s core business that is going to Verizon, allowing the telecoms group to use Yahoo’s ad technology tools and search, email and messenger assets.

Yahoo keeps its cash, its shares in Alibaba and Yahoo Japan, plus a portfolio of patents as it begins trading as an investment company.

It is not exactly a marriage made in heaven, but against the backdrop of Yahoo’s years of relative stagnation and Verizon’s ambitions on the internet it seems a pragmatic compromise.