Once upon a time in the local media space, the names AOL and Yahoo carried considerable weight. You might remember the massive businesses AOL and Yahoo had in serving ads, curating local content, connecting buyers and sellers. Initiatives like DigitalCities came out of AOL. There was Yahoo Local that intended to connect local consumers with local businesses.
Earlier today, we learned the fate of AOL and Yahoo has taken another turn. This time under the control of longtime private equity player Apollo Global Management, which will acquire the AOL and Yahoo assets from Verizon for a reported $5 billion.
The fit with Verizon may once have looked interesting in a corporate deck. But in reality, it never really caught hold. When those deals were consummated, Verizon’s then CEO Lowell McAdam described a “strategy to provide a cross-screen connection for consumers, creators, and advertisers to deliver that premium experience.” If that doesn’t sound like it was ripped from a corporate development deck we don’t what does. In the end, though, we’re guessing very few of the shareholders that have pushed the Verizon stock to a $240 billion market valuation expected the AOL and Yahoo assets to drive much value.
Reduced to a Rounding Error
The $5 billion purchase price represents roughly 2% of Verizon’s market cap. It’s also 50% of what the company originally paid for AOL (2015) and Yahoo (2017). Journalists will soon write books about the journeys (or falls from grace?) of two of the early Internet’s most iconic brands.
Of course, you remember the Time-Warner/AOL deal that was valued to the tune of $350 billion 20 plus years ago. What we take away from Verizon’s sale of the AOL and Yahoo media assets to Apollo is just how much has changed in the local media world.
Apollo has already made bets on two large local media properties. It has invested in radio and TV operator Cox Media Group and in the Gannet/USA Today newspaper organization. We can easily imagine the operators of these now disparate media properties gathering in a room to craft a plan for collaboration. And why not? At their current trajectory, they’re all less relevant in a world of global and local media dominated by Google, YouTube, Facebook, Instagram, and Twitter. Perhaps they stand a better chance by working together.
A No Brainer for Verizon
For Verizon, moving out of the media business is an easy call. The company, which touts itself as a leader in next-generation 5-G mobile technology, recently invested $53 billion in wireless spectrum. This massive investment has helped swell Verizon’s debt to $180 billion. So selling off the media assets for $5 billion seems more about eliminating a management distraction than helping reduce its debt.
Another asset that Verizon will be unloading in addition to AOL and Yahoo is TechCrunch. From our perspective, TechCrunch has done what it could to maintain its audiences and community with events like Disrupt and its daily news feeds about the changing world of technology.
In the end, the assets just didn’t fit with Verizon’s current path. Here’s what Guru Gowrappan, CEO of Verizon Media said about the transaction. “We are excited to be joining forces with Apollo…The past two quarters of double-digit growth have demonstrated our ability to transform our media ecosystem. With Apollo’s sector expertise and strategic insight, Yahoo will be well-positioned to capitalize 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.”
The company will be renamed again. This time it’s going with the Yahoo brand. We’ll be watching closely how the new Yahoo navigates the remarkably challenging world of media and advertising. While Guru’s statement is about what anyone would expect, we do wonder the following. Will this incarnation of Yahoo will drive a new beginning? Or will it finally be the beginning of the end?