Verizon Buys Yahoo for $4.8 Billion

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Verizon

End of an era, as one of the last independently operated pioneers of the web world, Yahoo has been sold to Verizon for $4.8 billion. Although any official announcement has not been made from any of the two companies, it is expected to happen before the markets open on Monday.

Founded in 1994, this Silicon Valley company started its journey as a directory to the world wide web and reached its peak during the dot-com boom. In January 2000, the market value of the company reached the all the time high and was valued more than $125 billion during that time. But since the mid -2000s the company started struggling and saw a dramatic fall. And today, although the company attracts more than a billion visitors per month, ends its journey as an independent company.

Verizon

The speculation was going on for the last five months, and plenty of companies were interested in buying the core internet business and some real estate caps of Yahoo. Many companies like AT&T, Quicken Loans Inc and firms such as Vector Capital Management & TPG actively participated in the bidding process. But Verizon, one of the USA’s biggest telecommunications companies, has apparently emerged as the winner and agrees to pay $4.8 billion for this troubled internet company.

Although being sold, the Yahoo will still keep its stakes worth $41 billion invested in the Chinese e-commerce giant Alibaba, as well as Yahoo Japan and a small portfolio of patents. It will also mark the end of the company’s CEO Marissa Mayer’s reign as the 41-year old tech celebrity is not likely to join Verizon and is due to receive a severance payout worth about $57 million. Ms Mayer, who was a former Google search executive, joined Yahoo in July 2012.

Created by two Stanford graduate students, David Filo and Jerry Yang, Yahoo started its journey as a hand-selected directory to the web world and quickly expanded their ambitions. From a $3 billion market value in January 1998, it skyrocketed to more than $125 billion in just two years. But then the bubble popped and in the fall of 2001, the market value of Yahoo smashed down to around $5 billion.

In the meantime, Google emerged as a better substitute of the go-to site for searching the web, as the latter gave stress on the ‘search engine’ part more and used a superior, more automated approach to indexing the web. The year 2007 was very significant in both Yahoo and Google’s history. On that year, for the first time, Google cracked the 50 percent mark in the share of all U.S. desktop searches, whereas Yahoo only managed to 27 percent. Since then the revenue of Yahoo began to slide, the financial crisis came and faded in importance. By the coming years, Google had established themselves as the world’s dominant internet company kudos to its brilliant search engine & its lucrative search ads. By November 2014, Google hit the 67 percent mark whereas Yahoo slid down to on 10 percent.

The inception of Facebook also harmed Yahoo in a big time, as the social networking site replaced the Yahoo chat room, which was hugely popular worldwide. From $2 billion revenue in 2010, Facebook hit the $18 billion revenue mark last year,  and it is reported that they have gained a $5.4 billion revenue alone in the first quarter of 2016. Today, Facebook and Google boss the 64 percent of all US digital advertising.

Yahoo tried their best to revive the company and came out of the crisis. In 2012, they hired Marissa Mayer as CEO, the fourth in the past four years. She took the vow to make Yahoo as a premium search engine again and reclaim its lost pride. Marissa opened a ‘digital magazine’ on tech, travel & food, hired the former TV anchor Katie Couric and acquired dozens of companies, including the blog network, Tumblr for $1.1 billion, expecting a yearly revenue of $100 million from this platform. But all these initiatives went in vain. In 2014, for the first time in the company’s history, Yahoo fell out of the Fortune 500. Yahoo also started investing in Smartphone technologies, but it was “late” and “behind”. Tumblr’s market value also came down to $230 million in March, this year.

As the company tried their hands in many areas, they lacked in focus, and it was very difficult to get success. Yahoo’s downfall was imminent and may be explained in the best way by the former Yahoo executive Mr Finnigan. He said and we are quoting, “You have to be Coke or Pepsi. You don’t want to be RC Cola. They let a lot of these verticals become RC Cola. It is a sad day for those Yahoos who tried as hard as they did to create value.”

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