Yahoo, one of the most iconic and influential web services of the internet era, has been sold again by its current owner Verizon to a private equity firm Apollo Global Management for $5 billion. The deal includes other media assets such as AOL, TechCrunch, and Engadget, which were part of Verizon’s media division.
Yahoo was founded in 1994 by Stanford University students Jerry Yang and David Filo as a directory of websites. It soon became a popular destination for internet users, offering a range of free and informative web services such as email, messenger, news, weather, sports, finance, and more. Yahoo also developed its own search engine, which competed with Google and Bing for online queries.
Yahoo was one of the first internet companies to go public in 1996, and its stock price soared during the dot-com boom of the late 1990s. At its peak in 2000, Yahoo had a market value of more than $125 billion. However, Yahoo failed to capitalize on its early success and adapt to the changing trends and technologies of the internet. Yahoo missed several opportunities to acquire or partner with emerging rivals such as Google, Facebook, YouTube, and Alibaba. Yahoo also suffered from frequent management changes, strategic blunders, and security breaches that eroded its user base and revenue.
Verizon’s Attempt to Revive Yahoo
Verizon, the largest wireless carrier in the US, acquired Yahoo in 2017 for $4.48 billion, after lowering the original offer by $350 million due to the disclosure of two massive cyber-attacks that compromised millions of Yahoo users’ data. Verizon also bought AOL in 2015 for $4.4 billion, another pioneer of the internet age that had fallen behind its competitors. Verizon combined Yahoo and AOL into a new media division called Oath, later rebranded as Verizon Media, with the hope of creating a digital advertising powerhouse that could challenge Google and Facebook.
However, Verizon’s media strategy did not pay off as expected. Verizon Media struggled to grow its audience and revenue, and faced stiff competition from other online platforms. Verizon Media also had to deal with the legacy issues of Yahoo and AOL, such as outdated technology, declining user loyalty, and legal liabilities. In 2018, Verizon wrote down $4.6 billion of the value of its media assets, essentially admitting that it had overpaid for them. In 2019, Verizon sold Tumblr, a blogging site that Yahoo had bought for $1.1 billion in 2013, for a reported price of less than $3 million.
Apollo’s Vision for Yahoo
Apollo, a private equity firm that specializes in buying and turning around distressed businesses, sees a significant opportunity to revitalize Yahoo and its associated brands. Apollo plans to invest in Yahoo’s technology, content, and commerce, and leverage its loyal and engaged user base of more than 900 million monthly active users. Apollo also intends to capitalize on the growth prospects of digital media, advertising technology, and consumer internet platforms, especially in the post-pandemic era.
“We are thrilled to help unlock the tremendous potential of Yahoo and its unparalleled collection of brands,” said Reed Rayman, private equity partner at Apollo. “We have enormous respect and admiration for the great work and progress that the entire organization has made over the last several years, and we look forward to working with Guru, his talented team, and our partners at Verizon to accelerate Yahoo’s growth in its next chapter.”
Guru Gowrappan, the current CEO of Verizon Media, will continue to lead Yahoo under Apollo’s ownership. Verizon will retain a 10% stake in the business and will remain a strategic partner. The deal is expected to close in the second half of 2021, subject to regulatory approvals and customary closing conditions.