Verizon buying Yahoo!’s core businesses for $4.83bn, a third place .com contender?

Verizon is acquiring most of Yahoo! $4.83bn in cash, to be combined with their AOL purchase. As a wet finger in the wind reckoning, this feels like it’ll put Verizon as a distant third place in eyeballs and ad revenue: that’s probably what the business case is targeting.

  • Yahoo! was at ~$4bn runrate (based on $1.09bn in revenue last reported quarter). Revenue has been declining steeply, down 11% q/q.
  • Valuation here is tricky, since Verizon is only buying “core assets.” One back of the envelop analysis put the “core assets” at $1.7bn, suggesting a valuation of ~2.8x.
  • Combined with AOL and other Verizon properties, the company says this will result in “global audience of more than 1 billion monthly active users — including 600 million monthly active mobile users.”
  • There’s fierce competition from Facebook and Google: “According to data from e-marketer in March, Yahoo’s worldwide net digital ad revenues will fall nearly 14% this year to $2.83 billion, from $3.28 billion in 2015. In contrast, Google will see a 9% increase while Facebook will be up by nearly a third year-on-year (31%).”
  • Despite this small pot of marketshare-by-revenue, at least in the US, the combined company will be in the top three of marketshare-by-eyeballs. If you were an i-banker looking at that in your spreadsheet, you’d think: we just need to increase eyeball-to-cash conversion productivity and – POW! – synergies!
  • As a reminder, AOL includes “The Huffington Post, TechCrunch, Engadget, MAKERS and” Yahoo! Mail has 225m monthly active users.
  • It keeps getting described as an “assets sale,” because Yahoo’s stake in Yahoo! Japan and Alibaba will stay with Yahol! As the NY Times puts it: “a 15 percent stake, worth about $32 billion based on its recent share price, in the Chinese internet company Alibaba and a 35.5 percent stake, worth about $8.7 billion, in Yahoo Japan.”
  • This will create some interesting post-deal structure for the numbers. The entire Yahoo! company is much bigger than that 1.1x valuation: “Yahoo! stock, which is up 18% this year, had a total market value of $37.4 billion at its close on Friday of $39.38.”
  • It’s pretty clear that the company wants to sell the remaining assets.
  • Rival bidders: “Suitors included Quicken Loans founder Dan Gilbert, communications giant AT&T and private equity firms Vector Capital Management and TPG.” AT&T seems to have been the main competitor. More from Kat Hall: “The telco was one of 40 suitors rumoured earlier this year to be interested, including Google parent Alphabet, Time and even Daily Mail parent DMG.”
  • It increases Verizon/AOL’s advertising marketing share, but Facebook and Google still dominate: “Verizon with AOL currently holds 1.8 per cent of the $69bn US digital ad market, according to The Wall Street Journal. Yahoo controls about 3.4 per cent, while Google and Facebook combined make up half of the total.”
  • Timing the sale of a declining asset is everything: “back in 2008, it turned down a $44 billion offer from Microsoft”
  • See some in-depth history and analysis from Timothy Lee over at Vox. The thesis seems to be: the company could adapt beyond it’s initial success in the 90s and never found a new identity beyond being a “media company.”

Highlight from: The Small Batches Principle – ACM Queue

Small systems are more flexible and malleable; therefore, experiments are easier. Some experiments would work well, others wouldn’t. Because they would keep things small and flexible, however, it would be easy to throw away the mistakes. This would enable the team to pivot, meaning they could change direction based on recent results. It is better to pivot early in the development process than to realize well into it that you’ve built something nobody likes.

Google calls this “launch early and often.” Launch as early as possible even if that means leaving out most of the features and launching to only a few select users. What you learn from the early launches informs the decisions later on and produces a better service in the end.


Highlight from: Why Continuous Delivery and DevOps are Product Managers’ Best Friends – MindTheProduct

I would need numerous hands to count the number of times I have seen product managers and clients add scope to a release, horde bugs, or refuse to deliver an MVP because they thought the next release was the only chance they had to complete a feature. Just last week a friend of mine at a well-known healthcare company said:

“We missed the May release train, so we go live in December. And that means January because of holidays, so we’re just doing some extra stuff until then.”