Following a long struggle to compete with Facebook and Google in the Internet advertising space, Verizon has agreed to sell its media businesses, including AOL and Yahoo, to Apollo Global for $5 billion.
The media unit will be known as Yahoo following the transaction’s close, which is expected to come in the second half of 2021, continuing to operate under the leadership of Guru Gowrappan, with Verizon keeping a 10% stake in the business.
After writing $4.6 billion off the value of the businesses in 2018, Verizon will get just $4.25 billion in cash from private equity firm Apollo.
The development is believed to be a demonstration of a shift in focus for Verizon, as it turns its attention to developing 5G infrastructure.
In 2019, the telecoms corporation sold the blogging platform Tumblr, before going on to agree to sell the HuffPost online news service to BuzzFeed Inc. last year.
The sale of Verizon’s media businesses to Apollo follows much interest in Yahoo from Apollo, which dates back to 2017.
Reed Rayman, partner at Apollo, said the firm will look to expand advertising and ecommerce, as well as growing key assets such as Yahoo Finance and Yahoo Sports, via new initiatives such as subscriptions.
While the purchase from Apollo spells the end to an ultimately unsuccessful advertising venture on Verizon’s part, Ted Chamberlin, vice-president, analyst – media and entertainment lead at Gartner, told Information Age: “I think this is a win for Verizon and Hans Vestberg, as he gets to recoup some cash to invest into continued 5G rollouts, but a win at a significant loss.
“Apollo acquires an asset that still has gravity with users — Yahoo still counts around 900 million active users worldwide.
“However, both brands have not been able to compete in the Google and Facebook-dominated advertising space, and with the depreciation of third party cookies on the horizon, the ad business for AOL and Yahoo will even more of a challenge.”
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New opportunities for Yahoo
As well as touting possible advantages for Verizon going forward, Chamberlin went on to state that the Yahoo business unit under Apollo could leverage new market opportunities.
He said: “Apollo management has an impressive track record of building their portfolio companies and not just ‘pumping and dumping’ for quick return.
“They allow companies to operate under a similar strategy and vision, but with more financial responsibility as they also encourage those companies to take on new business.
“I believe that Apollo will be the conduit for Yahoo to leverage other portfolio companies like McGraw Hill, for potentially operational synergies or market opportunity in content licensing and advertising.”
