Market Watch: The Yahoo Buyout

For technology enthusiasts, Yahoo’s fallout and recent operations isn’t news. There’s a plethora of analysis and articles stating why Yahoo failed; missing the opportunity with Google, Flickr, Facebook, Microsoft, bad executive decisions, and lack of innovation can be attributed to why Yahoo declined, and the list can go on further. 

Either way, Yahoo’s missed opportunity and major competitor Google continues to grow larger, taking up market shares of web browsing, email, news, and advertisement. In fact, Yahoo was receiving negative income since 2015. Yahoo’s recent five-year income statements show that its revenue did not change too much, but the cost of goods sold almost doubled from 2014 to 2016. Besides the increase in the cost of production, Yahoo experienced some highly “unusual expense” in 2015 and 2016. It doesn’t take an avid follower to see how Yahoo is being eclipsed by Google and other competitors. 

Despite Yahoo being looked down on by most of the high-tech industry, Verizon seem to be interested in acquiring the brand. In July 25, 2016, Verizon formally announced they will acquire Yahoo with $4.83 billion. However, due to the infamous hack that happened to Yahoo in December 2016 during the acquisition process, one billion user’s data was leaked due to a security breach. The price of the deal dropped about $350 million and now the acquisition has become $4.5 billion.  

Recently, the president and CEO of Yahoo, Marissa Mayer, announced that the acquisition will end on June 2017 with $4.5 billion. It will also be a representation of the end of an Internet era when Yahoo used to be the dominant search engine for information, email, and advertisement. After the acquisition, Marissa Mayer stated that she would step down from her position with Yahoo, compensated with a severance package worth about $23 million.

Despite the loss in search engine market shares, Yahoo still has a rich database of Yahoo users. If Yahoo could lose one billion users’ accounts to the hacker, it means that Yahoo has an enormous database of users that exceeds the one billion mark in the first place. Although some users may possess multiple accounts and some are no longer active, it is undeniable that a high quantity of personal data has been collected over years. About 3.2 billion of earth's 7.49 billion population has internet access. Yahoo’s user base consists of about one-third of all internet user data in the world. In addition, the US congress passed a bill recently, granting internet service providers the right to sell users’ information legally. This high quantity of user data will prove to be valuable to Verizon in the future.

In addition, about 23.8% of Yahoo’s web traffic is from the US; it is ranked #5 as the most web traffic received in the US. Yahoo is only behind Google, Facebook, Youtube, and Amazon. Globally, Yahoo’s still has 5.6% of the total market share in search engines. Yahoo may not be popular among the millennials anymore, but it still possesses market share due to the older generations. In India, Yahoo is also ranked #5 right after google.co.in, Google, Facebook, and Youtube. In countries like Brazil, Republic of China, and Indonesia, Yahoo still has a decent ranking in web traffic. 

Besides Yahoo Search, Yahoo still has some popular features in other parts of the world. In Japan, yahoo.co.jp is ranked second in receiving internet traffic, only behind google.co.jp. Yahoo news and Yahoo Auction also ranked #11 and #25 individually in Japan. The number of Japanese users that are currently using Yahoo Japan as a news source and for trading goods could be alarmingly large. Yahoo has also held 40% of the stocks of Alibaba, a Chinese e-commerce giant and successful investment by one of the founders of Yahoo, Jerry Yang. When this acquisition is over, all of these international presences will integrate with Verizon.

After finishing the acquisition by June, Verizon is planning to combine Yahoo and AOL. AOL is a multinational mass media corporation acquired by Veizon in 2015 with $4.4 billion. Together, these two acquired companies will be rebranded as Oath. At the same time, Verizon is acquiring startup tech firms such as Vessel, Sensitivity Systems, and LDQ WiFi. 

“Billion+ Consumers, 20+ Brands, Unstoppable Team, #TakeTheOath. Summer 2017.” CEO of AOL, Tim Armstrong tweeted.

Armstrong seemed to be very optimistic about Oath’s future. Tumblr, broadcast.com, and the other 51 companies acquired by Yahoo worldwide while Marissa was the CEO of Yahoo will unite under the banner of Oath. On the other hand, AOL had acquired 68 companies, including the Huffington Post, Netscape, and Time Warner. A few others are in the progress of acquisition as well.

These 119 companies acquired by Yahoo and AOL have all had some influences within the tech industry at some point while providing different types of services. It's no surprise that Armstrong is highly optimistic about this acquisition; AOL may gain access to a high quantity of information by this June. Perhaps the new Yahoo CEO after Marissa will feel the same way as Armstrong as well, as the opportunity in front of them is immense.