U.S. wireless operator, Verizon Communications, said on Monday that it agreed to sell Yahoo and AOL to the private equity firm Apollo Global Management for $5 billion, about half of the $9 billion it originally paid to acquire the pair in 2017 and 2015 respectively.
The sale includes Verizon’s advertising technology business as well, and the company will retain a 10 percent stake in the business, Verizon said in a statement announcing the deal.
The transaction is the latest turn in the history of two of the internet’s earliest pioneers. Yahoo used to be the front page of the internet, cataloguing 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 start-ups, like Google and Facebook, though Yahoo and AOL still publish highly trafficked websites like Yahoo Sports and TechCrunch.
Verizon, the United States’ largest wireless carrier in terms of subscribers, bought the websites intending to resurrect brands that had lost traffic since their heyday but still counted a base of hundreds of millions of account holders.
It reorganized the businesses in 2017 under former AOL Chief Executive Tim Armstrong, dubbing the combined division “Oath” and signaling its intention to go head-to-head with digital-advertising powerhouses like Alphabet Inc.’s Google and Facebook Inc.
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.
But Google and Facebook have proved to be formidable competitors in the digital advertising market. Verizon acknowledged the might of Google and Facebook 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.”
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The digital-media business ultimately failed to reach its target of $10 billion in annual revenue by 2020, and Verizon in 2018 wrote down about $4.5 billion of its value. Verizon has cut jobs in the unit, and in November agreed to sell its HuffPost news division to BuzzFeed Inc. That followed a 2019 agreement to sell the Tumblr blogging platform for a nominal sum to the owner of WordPress.
The 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% from the previous year due to a sharp advertising pullback during the early months of the coronavirus pandemic. Business picked up in the second half and the unit has logged two consecutive quarters of double-digit growth, including a boost of 10%, to $1.9 billion, in the first quarter.
Despite the rebound, Verizon has focused much of its attention lately on partnerships with streaming video services like Disney+ and Hulu that can be bundled with its wireless and home Internet plans.
By selling now, Verizon could raise needed cash at a time when valuations of similar assets are enjoying an upswing. The company this year committed about $53 billion to secure spectrum licenses that will support its ultrafast fifth-generation wireless network. Executives recently told investors that capital spending this year on network equipment, fiber optic cables, and the like could reach up to $21.5 billion.
The new owner of Yahoo and AOL, Apollo Global Management, Inc., is a global alternative investment manager firm. It was founded in 1990 by Leon Black, Josh Harris, and Marc Rowan.
Apollo is headquartered in New York City, with offices across North America, Europe, and Asia. The company’s stock is publicly traded on the New York Stock Exchange (NYSE) under the symbol ‘APO.
