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This May Explain Why Verizon Wants To Buy Yahoo's Properties

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This May Explain Why Verizon Wants To Buy Yahoo's Properties

Verizon Communications Inc. (NYSE: VZ) dished out $4.4 billion last year to acquire AOL, so why is it spending another $4.8 billion to buy Yahoo! Inc. (NASDAQ: YHOO)'s Internet properties which Warren Buffett himself said have "deteriorated significantly"?

According to The Washington Post, AOL chief Tim Armstrong proposed a merger with Yahoo's CEO Marissa Mayer two years ago. The deal was ultimately rejected by Mayer so Monday's announcement brings the "merger he once wanted."

AOL maintains a heavy presence in media content with a strong focus on advertising. However, AOL and its parent company Verizon may not necessarily be happy with merely providing its users with access to content - the company wants to "own a fat chunk" of content.

Related Link: Bob Peck Says Yahoo Holders Should 'Sell The News'

"Yahoo has failed for the last 13 years to exploit as a unified whole what is actually an excellent set of parts," Shar VanBoskirk, an analyst at Forrester Research told The Washington Post. "Yahoo hasn't been able to clearly define what it is and what value it provides."

Yahoo is a platform for content and under Verizon's watch, it can succeed where Yahoo failed and create a more valuable proposition for advertisers, the analyst added.

Afterall, Yahoo and AOL still dominate the online rankings of top digital media properties and ranked No. 3 and No. 6, respectively, on ComScore's list.

Bottom line, Verizon's strong move into the online space could serve as a sign that traditional telephone and Internet companies are worried that their business are being commodified.

Latest Ratings for VZ

DateFirmActionFromTo
Nov 2020Wells FargoReinstatesEqual-Weight
Nov 2020JP MorganUpgradesNeutralOverweight
Oct 2020Wolfe ResearchInitiates Coverage OnPeer Perform

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