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With Verizon’s acquisition of Yahoo core businesses set to close June 13, the focus now is on how effectively the telecommunications giant will leverage its purchase to accelerate revenues in the digital advertising space.
Yahoo shareholders this week formally approved the previously announced sale to Verizon for $4.48 billion. The figure is $350 million less than the $4.83 billion Verizon had originally offered when it first announced plans to buy Yahoo last July. Verizon negotiated the lower amount after Yahoo disclosure two separate massive data breaches in 2016 and earlier this year.
When the deal is finalized next week, one of Verizon’s first actions will reportedly be to slash about 2,100 jobs across Yahoo and its current web property AOL, which is Verizon unit with which it will integrate Yahoo. The reductions represent about 15 percent of the nearly 14,000 people that Yahoo and AOL currently employ and will apparently come mainly from redundant functions such as finance, HR, marketing and administration.
The reported layoffs are no real surprise, says Charles King, principal analyst at Pund-IT research. “The similarities between the AOL and Yahoo properties mean there are a lot of redundant positions,” he says. “I expect the marketing and sales organizations to take the brunt of the reductions, with Yahoo personnel suffering the most losses.”
Verizon’s purchase gives the company Yahoo’s core operational assets such as its advertising, search, mobile and content businesses. Verizon Communications’ chairman and CEO Lowell McAdam, has previously said he wants to use the Yahoo and AOL purchases to position Verizon as a global mobile media company.
Verizon will merge Yahoo’s core businesses with AOL’s, which the telecommunications company acquired in 2015 for $4.4 billion. The merged entity is called Oath and will be led by AOL CEO Tim Armstrong.
The combined AOL and Yahoo operation has more than 25 brands between them. From AOL’s side they include The Huffington Post, TechCrunch, Engadget and ONE by AOL while Yahoo brings Yahoo branded content in areas like finance, news and sports as well an a mobile apps analytics service and a native and search advertising capability. The company’s email service currently claims over 225 million active users monthly.
Through its acquisitions Verizon’s goal is to try and put itself in a better position to try and grab a bigger share of the online advertising dollars currently being hogged almost exclusively by Google and to a somewhat lesser extent, Facebook.
King says Yahoo and AOL’s combined user base could prove a big opportunity for Verizon. “AOL and Yahoo continue to support tens of millions of consumer and small business customers,” King said. “Those should be valuable audiences for tailored advertising and new service development.”
Verizon’s purchase does not include Yahoo’s 15 percent share in China’s Alibaba online marketplace. That stake is currently estimated to be worth well north of $30 billion. Neither does it include Yahoo’s 35.5 percent stake in Yahoo Japan, which is estimated to be worth another $9 billion.
Those shares will now reside with Altaba, the new name for the surviving portion of Yahoo after the transaction is completed next week. Altaba will become a holding company for Yahoo’s shares in Alibaba and Yahoo Japan shares.