Verizon once saw media as the future, the linchpin of a strategy to give customers something they could not get elsewhere at a time when all mobile offerings were essentially the same. It has a different vision for the future now.
The phone giant, signaling that it has given up on its media business, is near a deal to sell Yahoo and AOL to private equity firm Apollo Global Management, two people with knowledge of the matter said Sunday.
The transaction would be the latest turn in the history of two of the internet’s earliest pioneers. Yahoo used to be the front page of the internet, cataloging the furious pace of new websites that sprang up in the late 1990s. AOL was once the service that most people used to get online.
But both were ultimately supplanted by nimbler startups, like Google and Facebook, though Yahoo and AOL still publish highly trafficked websites like Yahoo Sports and TechCrunch.
The deal, which could be announced in the coming days, would value the brands at $4 billion to $5 billion and include Verizon’s advertising technology business as well. The people, who spoke on the condition of anonymity because the talks are confidential, cautioned that the talks could still fall apart.
When Verizon bought AOL in 2015 for $4.4 billion, the company called AOL “a digital trailblazer.” Lowell McAdam, Verizon’s chief executive at the time, championed the deal as part of its “strategy to provide a cross-screen connection for consumers, creators and advertisers to deliver that premium experience.”
Tim Armstrong, head of AOL, was part of the package, and he soon persuaded Verizon executives to add to its media holdings. Armstrong orchestrated the 2017 purchase of Yahoo for $4.5 billion — a prize he had been pursuing for years.
In the statement announcing the deal, Armstrong said, “We’re building the future of brands.”
It was all in the pursuit of almighty “scale,” a business term of art that has almost become a religious mantra in Silicon Valley. But the forces of internet economics had already shifted years before, and user-generated content, whether in the form of Facebook posts or YouTube videos, drove much of online activity. AOL and Yahoo, despite their big audiences, had become distant also-rans.
It is unclear what Apollo plans to do with the business, but it still generates plenty of revenue. The media division recorded $1.9 billion in sales in the first quarter, a 10% gain over last year. Apollo has been involved in other media deals. It helped finance the 2019 merger of USA Today parent Gannett and local newspaper chain New Media Investment Group, which created the largest U.S. newspaper publisher. And it owns the television and radio stations of the Cox Media Group.
The private equity firm has been on a buying spree in the past few months, announcing deals to acquire crafts retailer Michaels and the Venetian resort in Las Vegas. It has also had a shake-up in its senior ranks, with its co-founder, Leon Black, announcing in late March that he was stepping down as chair after the revelation he had paid more than $150 million to disgraced financier Jeffrey Epstein.
Apollo declined to comment. Verizon did not respond to requests for comment. Bloomberg, which first reported the expected deal, said Verizon would maintain a stake in the media arm.
The deal would signal the unraveling of a strategy Verizon heralded in 2015 when it acquired the faded internet giant AOL for $4.4 billion. The purchase was meant to give Verizon a pathway into mobile, with the goal of using AOL’s advertising technology to sell ads against digital content. Verizon doubled down on that strategy in 2017 with its $4.48 billion acquisition of Yahoo, which it combined with AOL under the umbrella Oath.
But Google and Facebook have proved to be formidable competitors in the digital advertising market. Verizon acknowledged their might in 2018 when it wrote down the value of Oath by $4.6 billion, attributing the move in part to “increased competitive and market pressures” that had resulted in “lower-than-expected revenues and earnings.”
Under its chief executive, Hans Vestberg, the company has instead emphasized improving the technology around its mobile business. In March, it agreed to pay nearly $53 billion to license wireless airwaves that will help the company expand its next-generation 5G infrastructure. It also plans to spend $10 billion over the next few years to wire more cell towers and upgrade its systems. The company’s total debt now exceeds $180 billion.
The media business was originally meant to differentiate Verizon from its rivals by giving it unique content offerings, but it did not work out that way. The phone carrier instead reached an agreement in 2019 with Disney to offer its new streaming service Disney+ free to its customers. (AT&T, by contrast, spent $85 billion to buy Time Warner in 2018 to create its own streaming platform, HBO Max.)
In 2018, Verizon announced the departure of Armstrong. The group was restructured, and in January 2019, it laid off about 800 workers, or about 7% of the staff.
Last year, Verizon began to dismantle the media group with the sale of HuffPost to BuzzFeed.
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