Tech News: What Does Verizon’s Yahoo Buyout Mean For The Company?

4th August, 2016 by

After months of speculation and rumours around what would come of the internet giant Yahoo and its holdings, it was finally sold in July to Verizon for $4.8 billion. While that may sound like a sizable amount of money, in internet software company terms, it is a pretty low sum. To give some context: it’s less than a quarter of Snapchat’s current valuation. Yahoo previously turned down a deal from Microsoft in 2008 to buy it for $45 billion.

Officially, the deal included all of Yahoo’s “core operating business”, which leaves out companies it has stakes in, such as Chinese e-tail giant AliBaba. But unofficially, Verizon didn’t just buy Yahoo, it also acquired all the components that Yahoo includes: the social blogging site Tumblr, the photo aggregation site Flickr, and the outdated Yahoo Mail. The reaction to the deal has been mixed, with tech insiders and pundits prognosticating what it means for Yahoo’s future and for the status of internet companies at large. Here is a roundup of some of the gossip and analysis in the wake of this sale:

It’s all about the money: Most agree that Yahoo could have garnered a better sale if it had agreed to a buyout sooner than it did. But while $4.8 billion seems like a remarkably low number, Alex Heard of The Guardian points out that it’s actually a pretty fair amount given Yahoo’s state of affairs: “To illustrate the dire straits Yahoo was in before the buyout,” Hern wrote “its market cap, which included its cash pile and those $40bn investments, was just $37bn. In other words, investors valued Yahoo’s core business at around minus three billion dollars. So selling to Verizon for almost $5bn is actually a fairly good deal.”

Did gender bias play a role? Not long after the news was announced, Yahoo’s CEO, Marissa Mayer, went on the record with the Financial Times saying that she thought “gender-charged” reporting had played a role in the media portrayal of her tenure at Yahoo and the company’s future. She was quoted as saying: “I’ve tried to be gender-blind and believe tech is a gender-neutral zone but do think there has been gender-charged reporting … I think all women are aware of that, but I had hoped in 2015 and 2016 that I would see fewer articles like that. It’s a shame.”

Will I stay or will I go? Despite her public statements, Mayer has stated her interest in staying on as CEO of Yahoo in the wake of the sale, though the decision may not be up to her. Her promises to bring a “renewed focus on product innovation to drive user experience and advertising revenue” when she came on in 2012 simply didn’t materialise. It will be up to shareholders to decide if she’s the best fit moving forward.

The big picture: While all signs point to the fact that Yahoo’s finest days are behind it, the situation itself has bigger implications for the state of internet media. The strategy that Mayer undertook to turn Yahoo around—investing in Yahoo’s media properties and creating original content—has proved not to have worked, and this is thanks in a large part to the current climate of the online economy where the search engine, rather than the publisher, is dominant. As Eric Schmidt of Google said himself, a new business model is needed in the age of the internet. “Now the internet has broken down the entire news package with articles read individually, reached from a blog or search engine, and abandoned if there is no good reason to hang around once the story is finished. It’s what we have come to call internally the atomic unit of consumption.”

What are your thoughts on the sale? Let us know on Twitter @UK2.

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