Verizon tries to sell Yahoo and AOL after spending $9 billion on fallen giants

Verizon is reportedly ready to give up on Yahoo and AOL after spending a combined $9 billion on the once-dominant Internet brands that fell from prominence years before Verizon bought them.

“Verizon is exploring a sale of assets including Yahoo and AOL, as the telecommunications giant looks to exit an expensive and unsuccessful bet on digital media,” The Wall Street Journal reported yesterday. The sale process involves private-equity firm Apollo Global Management and “could lead to a deal worth $4 billion to $5 billion,” the Journal wrote, citing “people familiar with the matter.”

We asked Verizon if it has a response to the WSJ report today, and a spokesperson told us the company has “nothing to add.”

The Journal report is a bit vague. The headline says that Verizon is exploring the sale of “parts of Yahoo and AOL,” but the story itself does not contain that “parts of” qualification. The article also said that “[o]ther details couldn’t be learned.”

Bloomberg’s article on the potential sale said that Verizon is considering selling its entire media division, including Yahoo and AOL, and did not contain any qualification suggesting that only “parts of” the units would be sold. Verizon “is talking to Apollo Global Management about a deal, [people familiar with the matter] said. It couldn’t immediately be learned how a deal would be structured or if other suitors may emerge. No final decision has been made and Verizon could opt to keep the unit,” Bloomberg wrote.

Verizon purchased AOL in 2015 for $4.4 billion and bought Yahoo in 2017 for $4.5 billion, combining the two into a subsidiary called “Oath.”

Failure quickly followed Yahoo purchase

Verizon’s acquisition-fueled media division failed to compete effectively against Google and Facebook in the advertising market. Verizon realized its media plans weren’t panning out by the end of 2018 when it said that Oath “experienced increased competitive and market pressures throughout 2018 that have resulted in lower-than-expected revenues and earnings.” This led to a non-cash goodwill impairment charge of about $4.6 billion, wiping out nearly all of Oath’s goodwill value.

In January 2019, Verizon announced layoffs of 7 percent of the 11,385 employees in the media division, or about 800 employes. Verizon renamed Oath as “Verizon Media” that same month. Another 150 layoffs followed in December 2019 after another drop in revenue.

“The [Verizon Media] business, which also includes Yahoo Finance and Yahoo Mail as well as news sites TechCrunch and Engadget, generated $7 billion of revenue in 2020, down 5.6 percent from the previous year due to a sharp advertising pullback during the early months of the coronavirus pandemic,” the Journal report said. “Business picked up in the second half and the unit has logged two consecutive quarters of double-digit growth, including a boost of 10 percent, to $1.9 billion, in the first quarter.” However, the media business “failed to reach its target of $10 billion in annual revenue by 2020,” and “[b]y selling now, Verizon could raise needed cash at a time when valuations of similar assets are enjoying an upswing,” the Journal wrote.

Tumblr, which Yahoo bought for $1.1 billion in 2013, was sold by Verizon to WordPress.com owner Automattic in 2019. An Axios report at the time said that a “source familiar with the deal puts the price-tag ‘well below’ $20 million, while another source puts it below $10 million.”

Verizon agreed to sell HuffPost to BuzzFeed in November 2020 and subsequently informed investors of “a net loss of $119 million primarily related to the disposition of the HuffPost business.”

Verizon recently committed to spend $45.45 billion in the 3 GHz “C-Band” spectrum auction to improve its mobile network. Verizon told investors that its capital expenditures in 2021 will total between $19.5 billion and $21.5 billion, “including the further expansion of 5G mmWave in new and existing markets, the densification of the 4G LTE wireless network to manage future traffic demands and the continued deployment of the company’s fiber infrastructure,” and “deployment of the company’s C-Band 5G network.”

Verizon’s total operating revenue in Q1 2021 was $32.9 billion, up 4 percent year over year. Net income was $5.4 billion, up 25.4 percent year over year.