But after the venerable but defunct online pioneer has become a graveyard for the reputations of a succession of media and tech industry leaders, it probably wouldn’t pay to assume success too soon.
The New York-based investment firm earlier this week agreed to pay communications giant Verizon $ 5 billion for Yahoo, as well as AOL and a collection of other digital media properties it had amassed.
The deal looks like a good deal compared to Microsoft’s $ 44.6 billion offer that Yahoo pushed back 15 years ago. Microsoft was hoping that it could use the internet portal company to create an online platform to compete with Google, which it saw as the main threat to its software dominance.
It’s also a shadow of Yahoo’s stock market value in the years since, when it became the target of repeated openings by private equity firms seeking to buy and break up the company. Most were aimed at Yahoo’s stake in Chinese e-commerce firm Alibaba, which has grown to eclipse the declining value of Yahoo’s own business.
And that’s just over half of what Verizon paid for Yahoo in 2017, combining it with the AOL company it bought two years earlier. Tim Armstrong, the former Google executive behind the plan, believed he could create an advertising platform to compete with Google and Facebook.
The size of Yahoo’s online audience is the root of many of these dreams. Outside of China, it still ranks as the fifth most popular website in the world, judging by a combination of the number of visitors and time spent on the site, according to web measurement company Alexa.
In a sense, Apollo’s interest in the business is no different. Yahoo’s 900 million monthly active users represent a “huge audience” that presents “tons and tons of opportunities,” said David Sambur, co-head of private equity at Apollo. At just over $ 5 per user, the purchase price is a steal in terms of internet trading.
Compared to other potential buyers, however, Yahoo’s new owner begins with a narrower focus: pick a handful of promising properties from Yahoo’s portfolio, put more weight behind them, and break the heavy advertising addiction that failed to raise his fortune. Implied, but not said, is a rejection of those parts of Yahoo’s business that are no longer considered essential, and the people who are employed there.
Two perennial problems weighed on Yahoo. One is the failure of successive executives to focus or invest enough in the best business opportunities, said Brian Wieser, who has covered Yahoo as an Internet analyst for years. Combined with the silos in which the company has operated, this has caused it to straddle too many different markets, he said. That criticism led one executive to warn, in a famous internal memo a decade and a half ago, that his strategy was as uncommon as peanut butter.
Yahoo still faces this legacy. This Tuesday, for example, marks the shutdown of Yahoo Answers, a question-and-answer service that has persisted for many years, despite declining from newer services. Sites like this always draw millions of users and attract a passionate community of users, which means the company is acting too slowly to shut them down, a former Yahoo executive said.
A second related failure was the company’s inability to resolve a fundamental question: whether it is primarily a media or technology company. This question was first raised during the tenure of Terry Semel, a former movie executive who ran the company after dotcom went bankrupt and pushed it heavily in online media.
When that strategy failed, the company’s board tried to turn the tide with the hiring of Marissa Mayer, former product manager at Google. But while some of its initiatives have generated positive reviews and brought Yahoo to social media with the acquisition of Tumblr, none have reached the scale or momentum needed to match the main rivals in the world. business.
Armstrong’s own plan for Yahoo also left him in the awkward position of straddling the worlds of tech and media, according to two people who have observed his efforts closely.
Its stated goal was to combine it with AOL to create an “adtech” platform capable of competing with giants like Google. But its real interest lies in the group’s large portfolio of media properties, one said. Another said that after Verizon’s takeover of Yahoo, the company’s center of gravity inevitably shifted to New York, reducing the influence of the company’s developers over its management.
Apollo’s intentions for Yahoo suggest a partial answer to some of these long-standing issues. The first of these is to strengthen concentration in markets where Yahoo already has a strong presence, and to develop new forms of income beyond advertising.
Sports betting is at the top of the list. Yahoo has already worked for years to remove regulatory hurdles to get into betting, the former official said, and it forged an alliance with MGM in 2019 to provide service to the millions of users who participate in its gaming leagues. fantastic sports.
Apollo now claims that its own massive presence in the gaming world puts it in a good position to transform Yahoo Sports into a powerful online gaming and sports betting platform. The investment firm acquired America’s largest gaming empire, Harrah’s Entertainment, in 2008 with rival buyout group TPG for $ 31 billion, although the firm, later renamed Caesars, later went bankrupt. He also took over Gala Coral in 2010 and later merged it with Ladbrokes to compete with British bookmaker William Hill.
More recently, Apollo acquired the operations of the Las Vegas Sands resort and casino, The Venetian for $ 2.25 billion, Great Canadian Gaming for $ 2.5 billion and Italian sports betting group Gamenet.
“Apollo has a lot of experience in games and sports betting. I think we are well positioned to maximize the value of the Yahoo Sports opportunity, ”Sambur said.
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Yahoo Finance, long one of the company’s gems, could present another opportunity to go beyond advertising. Apollo plans to tap into its large audience, which is currently made up of retail investors using its free trading tools and news feed, potentially building more profitable businesses, including providing access to financial services products. .
“I see a great opportunity, by using this brand, to monetize their tremendous user base in other areas of finance,” Sambur said. The private equity firm is looking to see if it can turn Yahoo Finance into something more lucrative, like a stock broker like Robinhood, or if it can dive into the cryptocurrency business.
But even if it uses such openings to move beyond advertising, Apollo will still have to succeed where previous Yahoo owners failed: turning its enviable audience into a more compelling appeal to advertisers competing with Google, Facebook. and Amazon.
“There’s a lot of room between where we are and where these guys are,” Sambur said. “This market is so big that closing the gap, even a small amount, would create tremendous value.”
Additional reporting by Anna Nicolaou