Complex Made Simple

Unable to recapture old glory, internet remnants Yahoo and AOL are sold

Do you still have an AOL or Yahoo email? Perhaps, but it’s unlikely that you are using any of them, not with companies like Google, YouTube or Facebook around

Yahoo and AOL were sold to private equity firm Apollo Global Management for about $5 billion Yahoo was once worth $125 bn; several years later it turned down a Microsoft offer to buy it for $44 bn Compared with Google, where engineers are and always will be the alphas, Yahoo tried on new looks

Do you still have an AOL or Yahoo email? Perhaps, but it’s unlikely that you are using any of them, not with companies like Google, YouTube or Facebook around. 

Verizon announced it was selling the two sites, Yahoo and AOL, to private equity firm Apollo Global Management for about $5 billion, roughly half of what it paid to acquire them. 

Verizon Media Group CEO Guru Gowrappan, who will remain in the top job at Apollo, says the PE firm plans to invest in Yahoo and AOL’s “iconic products.”

The companies helped create the internet as we know it today. 

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Fall from grace

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, the 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 bn. 

Armstrong at the time said, “We’re building the future of brands.”

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.

As Insider columnist Adam Lashinsky writes, the slow decline that befell both companies is the result of a long list of causes. He said Yahoo had early on recognized many trends but failed to capitalize on, allowing other companies to steal the show.

In fact , once upon a time Yahoo was worth $125 bn; several years later it turned down a Microsoft offer to buy it for $44 bn.

“It bought a Web 1.0 company called GeoCities that could have been the next MySpace or Facebook but wasn’t. The same goes for Flickr, the preeminent photo-sharing site of its day later outshone by Instagram. It even beat Google to the punch by acquiring the original search-based ad auction company, Overture, only to be overwhelmed by its competitor.”

It also spent billions on Broadcast.com (the source of Mark Cuban’s wealth) but stood by while Netflix rose to prominence.  It repeatedly was either too slow to realize the right strategy or too inept to execute its astute strategic moves. 

Compared with Google, where engineers are and always will be the alphas, Yahoo tried on new looks. Its technical founders, Jerry Yang and David Filo, gave way to a Hollywood studio veteran in Terry Semel. Later a sales executive, Carol Bartz, tried her hand. It’s tough to maintain a culture this way.

Now what for Yahoo?

Still, Yahoo isn’t done. Most assume Apollo will do a combination of ditching saleable properties, while subscription opportunities of Yahoo Finance.

The Verizon media business still generates plenty of revenue. Its media portfolio also includes online brands such as TechCrunch, Makers, Ryot and Flurry, according to its website. It reported revenue of $1.9 bn in the first quarter of 2021, up by 10.4% year-on-year.

Apollo has been involved in other media deals. It helped finance the 2019 merger of the USA Today parent Gannett and the 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.