Yahoo Sold to Verizon for $4.8 Billion – End of an Era!

Jerry and David’s Guide to the World Wide Web has found a buyer. Verizon has won the bid to buy the iconic Internet company, better known as Yahoo!

Ending years of struggle for the storied tech giant Verizon will buy the company’s core assets for $4.8 billion. Yahoo’s much scrutinized CEO, the charismatic, Marissa Mayer will walk away with a severance package of $55 million. Verizon beat AT&T, TPG, and Quicken Loans founder Dan Gilbert for the bid.

If ever one needed an example of a tech bubble bursting and bringing a legendary corporation to its feet, Yahoo’s case would suffice. The company was worth a little over $125 billion at one point in time but a $4.8 billion bail-out now seems like a good deal for Yahoo!

Yahoo came to market much earlier but failed to compete with its competition because of a clear lack of direction brought about by poor management decisions and a perennially troubled leadership team. The reason why Yahoo is considered an iconic company is its early success with Internet services. But with the rise of Google and the advent of social media, Yahoo struggled to build momentum on top of its early success. Let’s take a brief look at what brought about Yahoo’s eventual fall from grace.

The Dot-com Bubble

Perhaps the most famous and feared times in tech history were those of the dot-com bubble of the late nineties. The stocks and valuations of many companies including Yahoo rose sharply during the 1997-2000 period and then when the bubble finally burst most companies that had seemingly benefited couldn’t survive due to the crashing stock prices.

At the height of the dot-com boom, on January 3, 2000, Yahoo’s stocks closed at $118.75. This was of course the highest ever per share value of Yahoo stocks. After the speculative bubble burst, Yahoo stocks closed at an all-time low of $8.11 a share. The date was September 26, 2001.

The Yahoo acquisition spree

Yahoo is one of those companies that has always believed in the acquisition magic. The company has acquired some of the most lucrative and promising start-ups of their times and eventually turned them into the laughing stock of the tech world.

It is not uncommon for tech giants to acquire companies by the truckload. On last count Google had acquired over 190 companies in all and Microsoft is closing in on 200 acquisitions. But the difference is that Google and Microsoft have made full use of the acquisitions. While these two have had their share of failed acquisitions, most of their acquisitions have yielded good results. On the other hand Yahoo has acquired over 120 companies and it is hard to point towards a stand out success story among Yahoo’s acquisitions after Yahoo acquired them.

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Yahoo bought Flickr and pretty much destroyed its fan appeal. The most famous Yahoo acquisition back in the day was Mark Cuban’s Internet radio company Broadcast.com. Yahoo acquired Broadcast.com for $5.7 billion in 1999. In recent times Yahoo acquired popular blogging service Tumblr for $1.1 billion. This proved to be a catastrophic move for Tumblr.

Back in the day Tumblr was largely popular with the young crowd and Yahoo wanted to capitalize on its viral quotient. What Yahoo failed to realize was the rise of other popular services like Snapchat and Medium that were gaining prominence with the younger demographic which was beginning to care less and less for Tumblr.

The youth is fairly well acquainted with brand perception these days and Yahoo has had the reputation of being a patent bully and the old-guard of the Internet. Millennials did not take kindly to one of their favorite services being acquired by the old guard and becoming susceptible to the flurry of ads that Tumblr had previously completely ignored. The result was yet another failed acquisition. In fact some of Yahoo’s acquisitions are valued more than Yahoo itself.

Frequent change in leadership roles that didn’t pan out as planned

While Marissa Mayer has been at the helm of Yahoo for 4 years now, there was a time when Yahoo’s CXO level positions probably had a higher attrition rate than their internship positions. In an almost unbelievable sequence of events Yahoo’s last 4 CEOs before Mayer took over had the worst time anybody leading a tech giant would hope to have.

Ross Levinsohn was the guy who bought Myspace for $500 million (for Fox Interactive) before becoming Yahoo’s interim CEO. Enough said about Ross. Before Ross, getting rid of Scott Thompson was imperative as his educational qualification was under question. Before Scott, Carol Bartz told Mike Arrington to f**k off at the tech industry’s most famous fireside chat. Later Carol was fired over the phone. Before Carol, Yahoo co-founder Jerry Yang had the following to say after Microsoft offered to buy Yahoo for $44 billion:

The global online advertising market is projected to grow from $45 billion in 2007 to $75 billion in 2010. And we are moving quickly to take advantage of what we see as a unique window of time in the growth—and evolution—of this market.

His vision for the company didn’t quite turn out to be entirely accurate. Yahoo’s core business is now negatively valued.

We will have to wait and see what becomes of Yahoo after Verizon acquires it but despite the company’s several patents and current stake in Alibaba and Yahoo Japan, which amount to about $41 billion in value, the fact remains that Yahoo’s era is over. And with it the old guard of the Internet has finally conceded defeat to the new guard.