What Verizon Gets in Its $4.8B Yahoo Purchase

Dimitrios Kambouris/Getty Images for Yahoo; Justin Sullivan/Getty Images; Jamie McCarthy/Getty Images for AOL
Marissa Mayer, Lowell McAdam and Tim Armstrong

The telecom adds millions of eyeballs as it seeks content to avoid becoming a "dumb pipe."

On July 26, the morning after Verizon agreed to buy Yahoo for $4.8 billion, CEO Lowell McAdam announced that the company's catchphrase "Can you hear me now?" had become "Can you see me now?" It was a nod to how important video content has become for the telecom giant, which in the past year has bought or invested in a stable of media properties that includes AOL, AwesomenessTV and Complex. The deals are key to Verizon's plan to avoid obsolescence in an age when young people would rather Snapchat or watch YouTube videos than talk on the phone or switch on a TV.

It's a future in which Verizon's 113 million customers use their phones to open a Verizon app like streaming service go90 and watch videos produced or licensed by its media arm before they are directed to an ad placed using Verizon's intricate network of advertising technology products.

"We view this as a waterfall of content moving down through our different properties," McAdam recently told investors. In other words, Verizon, valued at $220 billion with 160,000 employees, does not want to become a "dumb pipe" — the concern that drove Comcast's 2011 purchase of NBCUniversal and AT&T's recent stake in Fullscreen.

AOL, which Verizon bought for $4.4 billion in 2015, has provided the telecom with the ad tech to drive revenue from these efforts. Verizon bought a nearly 25 percent stake in web video producer AwesomenessTV and created a digital video joint venture with Hearst to boost its content output, and it launched the ad-supported go90 to reach young viewers directly, even if its series of rich content deals have yet to pay off. Yahoo, which (for now) is led by CEO Marissa Mayer but soon could be under AOL CEO Tim Armstrong, offers the promise of distribution at scale via the 1 billion users it drives each month to its home page and other channels.

"Yahoo and AOL are the free-content funnel available to every consumer worldwide," says Creatv Media consultant Peter Csathy. "Yahoo's reach alone is extremely valuable to Verizon from a sheer marketing standpoint, both for go90 but also for Verizon's core wireless business."

Armstrong now will be tasked with integrating Yahoo's media properties into Verizon, but he tells THR he's optimistic: "We're in a very good position to help Verizon invest in original video, then leverage partnerships Verizon has through go90 to build a unified customer experience."

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VERIZON'S NEW VIDEO WAR CHEST

SPORTS
What Verizon/AOL has: Verizon is a partner of the NFL and streamed Super Bowl 50 for its customers on the go90 app, which now offers a mix of live games, highlights and sports-themed shortform web shows.

What Yahoo brings: Yahoo showed off the strength of its home page by attracting 15.2 million unique viewers to its live stream of an NFL game from London. Verizon CEO Lowell McAdam has teased future such content deals.

NEWS
What Verizon/AOL has: Arianna Huffington’s The Huffington Post has grown under AOL to include a global roster of video and editorial content. In June, it had 75 million visitors in the U.S. alone, according to comScore.

What Yahoo brings: Yahoo’s top star likely is anchor Katie Couric, whose RNC videos drew more than 18 million views. But with her contract up in 2017, there’s no guarantee she’ll stay.

BUSINESS
What Verizon/AOL has: AOL owns the blogs TechCrunch and Engadget, and HuffPo covers some industry news. Given the overlap with Yahoo’s technology and finance departments, analysts expect staff cuts.

What Yahoo brings: McAdam called Yahoo Finance its “strongest asset” and suggested Verizon could partner with other Yahoo bidders (Dan Gilbert and Berkshire Hathaway’s Warren Buffett?) on new content.

ORIGINAL PROGRAMMING
What Verizon/AOL has: After several years making shortform video fronted by well-known faces, like Nicole Richie’s Candidly Nicole, AOL is focused on live through the talk-show format Build and 360-degree videos.

What Yahoo brings: Yahoo dove into scripted TV with Community and others but after writing off those efforts has focused on video that adds to its digital magazine verticals.

This story first appeared in the Aug. 12 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.

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