Apollo Buys Verizon’s Bag for $5 Billion

Issue 69

Hold onto your seats we’re going back in time. In 1999, at the height of the dot-com bubble and the market frenzy that pumped tech stocks to the moon, AOL had a market cap of $222 billion and Yahoo respectively had a market cap of $140 billion.  The dot-com frenzy helped give many of today’s internet giants the necessary runway of easy public capital to become the behemoths they are today - one of those notable dot-coms was Amazon. These valuations of tech properties in the late 90’s even make the WeWork valuation peak appear sober.


Fast forward to 2008, Yahoo on paper was worth $44 billion, a sharp 68% decline from its dot-com height. This was based on then Microsoft CEO Steve Balmer’s tenured takeover of the company. Microsoft, however, ultimately passed on the deal, dodging a markdown bullet.  The dirty secret behind Yahoo’s valuation at the time wasn’t that it had a strong performing digital ad business with a strong outlook, it was that they were sitting on a mountain of Alibaba stock that, at the time, conservatively was worth 70% percent of the company’s valuation.

The truth was Yahoo’s media unit was hemorrhaging and would later further lose ground to the likes of Google and Facebook, slurping up every digital ad dollar within its vicinity.

Enter Verizon: In the mid 2010’s Verizon’s board thought it would be a good idea to bring the telecom giant into the media business and diversify its revenue streams with digital ad dollars.  While in part the company was on the right track, telecom companies need to brace for changes in business networks and ensure that the decks of the Titanic have enough life rafts. Yahoo, however, would not be the company’s absolution.

Yahoo’s management, during and after it’s dot-com peak, had made some of the most reckless and arguably stupid acquisitions in the history of M&A.  If you’ve ever wondered how the likes of Mark Cuban became a billionaire, you aren’t alone. Yahoo bough his company, Broadcast.com, in 1999 for $5.7 billion.  As a result, we have them to thank for his never-ending public folly and pontification.

In 2015, AOL was then worth $4.4 billion on paper, a 98% valuation drop from its dot-com height, and was subsequently acquired by Verizon, marking the beginning of the end for Verizon’s Segway into digital advertising. Another stunning discovery during that deal was that AOL at the time still had 2.2 million paying dial-up subscribers. Two years later, in 2017, Verizon bought Yahoo’s American unit for $4.8 billion, without its massive cache of Alibaba stock or Yahoo Japan.

Verizon Media ultimately bought dying brands and seemingly participated in an act of outright corporate altruism - spending north of $9 billion on companies that completely failed in adequately transitioning to digital, designing a substantive monetization model for the applications it previously acquired, and making the necessary changes to rebuild.

Verizon Media Brands (Source: Verizon)

This brings us too today. The private equity juggernaut Apollo has come in to buy 90% of Verizon’s media assets, encompassing more than a dozen online brands for $5 billion- a combined valuation drops of 45% for AOL and Yahoo.  The future of these brands is uncertain, but with a private equity firm involved, the brands can expect some heavy fat trimming with a chance of layoffs – perhaps then these once internet trailblazers may have a new shot at redemption.


Source: Brookfield Brief