Verizon Communications, reporting that it has quit its media business, said Monday it had agreed to sell Yahoo and AOL to private equity firm Apollo Global Management for $ 5 billion.
The sale also includes Verizon’s advertising technology business. Verizon will retain a 10% stake in the entire company, it said in a statement.
“This next Yahoo development will be the most exciting yet,” said Guru Gowrappan, chief executive of Verizon Media, in a note to employees Monday, which was obtained by The New York Times.
Mr. Gowrappan will continue to lead Verizon Media after the deal.
The transaction is the latest turning point in the history of two of the Internet’s first pioneers. Yahoo was once the Internet’s first page, listing the breakneck pace of new websites that sprang up in the late 1990s. AOL was once the service most people used to connect online.
But both were eventually supplanted by more nimble start-ups, like Google and Facebook, though Yahoo and AOL still publish heavily trafficked websites like Yahoo Sports and TechCrunch.
The sale signals the dismantling of a strategy Verizon announced in 2015 when it acquired washed-out internet giant AOL for $ 4.4 billion. The purchase was intended to give Verizon a path to mobile, with the goal of using AOL’s advertising technology to sell advertisements for digital content. Verizon doubled that strategy in 2017 with its acquisition of Yahoo for $ 4.48 billion, which it combined with AOL under the umbrella of Oath.
But Google and Facebook have proven to be formidable competitors in the digital advertising market. Verizon recognized its power in 2018 when it reduced the value of Oath by $ 4.6 billion, attributing the move in part to “increased competitive and market pressures” which had resulted in “revenues and profits below expectations ”.
Still, the business generates a lot of revenue. It recorded $ 1.9 billion in sales in the first quarter, a gain of 10% from a year ago.
For Apollo, this is an opportunity to invest more in the digital media space – an industry in which it has already invested money with deals for Shutterfly, Rackspace and Cox Media. And he has a lot of experience with corporate exclusions like the Verizon media business.
Apollo aims to propel sales growth with a greater focus on individual brands that it believes are lost in a large corporate empire, which could include more premium subscriptions for Yahoo Finance or more. sports betting and fantastic leagues as part of its Yahoo Sports business, two Apollo executives told The New York Times in an interview.
Apollo is also particularly optimistic about the prospect of digital advertising, as it is spending more money on these efforts as part of the regulatory review of some of the bigger players, like Google. And as ads shift from offline to online after the pandemic, Apollo expects the entire industry to grow.
“Does most of this information go to Google and Facebook and Snap and Twitter? Of course, ”said Reed Rayman, a private equity partner at Apollo. “But, is there still a role for others in the digital media space to benefit from the rising tide, like Yahoo and the other properties? Absolutely.”