The US-based telecom company Verizon is selling its media businesses, which include iconic brands Yahoo and AOL, for $5 billion, putting an end to a costly and disappointing run in the media and advertising industry.
Despite investing over a decade and billions of dollars purchasing a stable of internet brands, the telecom giant has struggled to gain traction in a highly competitive internet advertising space dominated by Facebook and Google and has instead concentrated its resources on improving 5G.
After writing $4.6 billion off the valuation of the businesses in 2018, Verizon will receive just $4.25 billion in cash from private equity firm Apollo Global, along with $750 million in preferred interests and a 10 percent stake in the unit about half of what it paid for the businesses.
Verizon sold blogging platform Tumblr for an undisclosed amount in 2019 and news website HuffPost to BuzzFeed last year in a steady stream of deals.
The series of media divestitures came after Verizon CEO Mr. Hans Vestberg took the helm of the wireless provider from his predecessor Mr. Lowell McAdam, who was responsible for the company’s vision of becoming a media and telecom giant.
Mr. Vestberg prioritized network expansion after spending $52.9 billion on the C-band spectrum in a government auction earlier this year.
When the deal closes in the second half of 2021, the divested unit, which was formerly known as Oath and was recently renamed Verizon Media, will now be called Yahoo and will continue to be headed by Mr. Guru Gowrappan.
The deal for Apollo comes at a time when the major internet platforms have sewn up big portions of the digital advertising market, drawing regulatory scrutiny.
When Apollo, a Shutterly and Expedia Inc investor, ran a process in 2017, it was interested in the Yahoo asset.
Apollo partner Mr. Reed Rayman said that the private equity firm would aim to expand advertising and eCommerce, as well as develop key assets such as Yahoo Finance and Yahoo Sports, through new business initiatives such as subscriptions.
In 2017, Verizon spent nearly $4.48 billion on Yahoo, betting that its 1 billion-plus users would be a fertile audience for online advertising. In 2015, it paid $4.4 billion to buy AOL’s email service.
According to Verizon Media’s website, its portfolio also includes online brands such as TechCrunch, Makers, Ryot, and Flurry. It made $1.9 billion in revenue in the first quarter of 2021, up 10.4 percent year over year.