Yahoo to sell core businesses to Verizon, become known as 'Altaba'

Yahoo, once the most popular website in the United States, may no longer be known by its well-known moniker following a pending sale to Verizon for $4.8 billion.

First Look

One of America's first gateways to the world wide web, could be getting a new name, if Verizon's $4.8 billion purchase of internet hub Yahoo goes according to plan.

Yahoo, a company that was once valued at more than $100 billion and still currently ranks as the highest-read news and media website and the sixth most visited website in the world, according to Pew Research,  will sell its core internet business. What's leftover will be called Altaba, effectively ending an internet brand that has operated for more than 20 years.

The name of the remaining part of the company (consisting of a stake in Alibaba and Yahoo Japan) is a combination of "alternate" and Alibaba, a Chinese e-commerce company with whom Yahoo partnered. It also reflects the new nature of the company, which would primarily include stakes in Alibaba (worth about $35 billion) as well as a smaller stake in Yahoo Japan (worth about $8.5 billion).

The deal would also include CEO Marissa Mayer’s stepping down, as well as the departure of Yahoo co-founder David Filo and four other key members of the Yahoo board, according to an SEC filing. Ms. Mayer, who joined Yahoo in 2012 as the company's sixth CEO since 2007, made valiant efforts to turn around the ailing company.

Now, the currently pending deal would see the end of her tenure with Yahoo as Verizon looks to consolidate its holdings.

The Verizon deal began developing in the spring of 2016 as the Yahoo board sought outside advisers to explore strategic options for improving the company’s overall outlook.

Immediately Verizon expressed an interest in acquiring Yahoo’s core businesses in order to complement their recent purchase of AOL last year for $4.4 billion. That move was formulated by Verizon primarily as a way of gaining AOL’s programmatic ad technology, which streamlines buying and selling ads as well as matching them to readers by using an algorithm.

As Verizon continues to expand its presence as an internet provider, both through mobile networks as well as home and business connectivity, automated ad buying is considered essential for simplifying the process of buying and selling ads.

“If more content is being streamed online, they have to think of a new way to sell ads,” said Praveen Menon, an internet analyst for Bloomberg. Thus, by acquiring AOL, they gain access to their programmatic technology, which is important “given that programmatic is an increasing portion of ads sold online.”

Similarly, Verizon’s impetus for purchasing Yahoo also comes from their major goal of building their overall advertising suite.

"Verizon is trying to pivot its business from analog to digital,” analyst Craig Moffett of MoffettNathanson told The Wall Street Journal. "Verizon believes that a combined AOL/Yahoo would provide the digital advertising platform they need to execute their video reinvention strategy. They are trying to monetize wireless in an entirely new way. Instead of charging customers for traffic, they are turning to charging advertisers for eyeballs.”

By acquiring Yahoo’s core businesses, Verizon would gain not just a larger foothold in the developing world of internet advertising, they would also gain the company’s enormous amount of user data with which they can improve the way they target both their own ads to readers as well as ads served by others.

This user data may also be the one major sticking point that would keep the deal from going through. Just last month Yahoo revealed that they were the target of a massive security breach in which hackers stole data from more than one billion accounts in August 2013 – a separate breach from one they disclosed in September in which they admitted that data from 500 million accounts were stolen.

Yahoo said that the stolen information included names, email addresses, phone numbers, birthdates, and security questions and answers. 

It appears that the deal is set to move forward, however, and if it does so Mayer will receive an estimated $55 million severance package from Yahoo.