In case you missed it, Yahoo’s core assets have been sold after a long and boring auction process, per Recode:
Verizon has entered into a agreement to buy Yahoo in an all-cash deal of $4.83 billion. The core business of the Silicon Valley Internet giant will be integrated with AOL, the other iconic Web brand that the telco giant bought last year for $4.4 billion.
This deal comes a little more than a year after the closing of Verizon’s (VZ) $4.4 billion acquisition of AOL (in June of 2015). AOL CEO Tim Armstrong described the the addition of AOL to Verizon as the potential to offer a “full stack”….. video, content & advertising and that it gave VZ a “new seat at the biggest table in the world… the internet revolution”. Yeah he said that (watch here).
That’s a lot of Ted Talk mumbo jumbo. That is until you drill down on the revenue opportunity away from mobile service that exists for a mobile carrier like Verizon with a large installed base… with the right digital assets. In the June 2015 interview on CNBC (link above), Armstrong spoke to the massive secular shift in advertising towards what he calls the”mechanization of problematic advertising of Madison Avenue”, and then the obvious shift towards video and mobile, from CNBC:
“There’s what we call the 40-40 opportunity, which is $40 billion going to mobile and $40 billion going to video,” he said, adding that AOL would layer content services over Verizon’s network.
So now for a little historical Snark. AOL was bought at the top of the internet bubble in 2000 for $160 billion by media giant Time Warner. At that same time YHOO’s market cap topped out around $125 billion. I’ll just leave it at that. Whatever happens next, I think this deal officially closes a chapter of Web 1.0. But it also speaks strongly to the next phase, a long time in the making. And that’s that converging of technologies and platforms in new mobile communication empires. Web 2.0 was marked by the explosion of mobile devices, social platforms and services, with cheap bandwidth powered by cloud computing, with the promise of monetization, largely through advertising.
What’s fascinating to me is that we are still talking about AOL and Yahoo at the dawn of Web 3.0, as if they even matter. That’s because how inconsequential their businesses are in terms technological advancement. What’s clear about Web 2.0 is that messaging, social and video on mobile devices are not enough (which is why YHOO and AOL limped along during the last decade) and Web 3.0 will be marked by the convergence of augmented / virtual reality, artificial intelligence / machine learning, powered by big data on the back of cheap cloud computing. This is the sort of stuff that will legitimately change the course of how humans exist and interact.
Verizon is playing Moneyball. Buying players that others no longer see value in. All they need is one (or the combination of a few) of those to work out and it will be money well spent. But the bigger challenge for a company like Verizon is identifying the right pieces of Web 3.0 and not just wait around to pick up the losers of previous generations on the cheap. The web 3.0 initiatives seem to be almost exclusively in the hands of Web 1.0 and 2.0 winners like Google and Facebook, and its telling that neither made a meaningful push for YHOO’s core.