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Verizon to buy Yahoo for $4.83 billion, merge it with AOL

After a drawn-out process, a troubled Yahoo finally knows its fate, which means the end of independence for one of the web's earliest stars.

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It's official. Yahoo will soon have a new owner: Verizon.

The two companies made the announcement Monday after a months-long courtship between the troubled internet giant and the largest wireless company in the US.

Verizon will pay $4.83 billion in cash for Yahoo's core internet business, which includes iconic web brands like Yahoo Mail, Fantasy Sports, photo storage site Flickr and Yahoo search, as well as the company's advertising technology.

Verizon has become a collector of high-flying brands from the early days of the internet. The telecom giant will merge Yahoo with AOL, another past-its-prime web trailblazer that it bought last year for $4.4 billion. The thinking is that the two companies can combine to make a solid No. 3 alternative to digital advertising juggernauts Google and Facebook, which rank as the most-trafficked websites in the world. Right now, those two companies account for almost 43 percent of digital ad sales worldwide, according to eMarketer. Yahoo is in seventh place with 1.5 percent.

Verizon executive Marni Walden will be in charge of both AOL and Yahoo.

CTIA

"The acquisition of Yahoo will put Verizon in a highly competitive position as a top global mobile media company, and help accelerate our revenue stream in digital advertising," Verizon CEO Lowell McAdam said in a statement.

The end of independence for Yahoo might be more sentimental than anything else. The company started as "Jerry and David's Guide to the World Wide Web," when Stanford grad students Jerry Yang and David Filo launched it in 1995 as a directory for the internet. The service played an important role in bringing the internet to regular people, teaching them how to surf the web for news, sports and entertainment.

Once the web's brightest star, Yahoo saw its brand fall out of fashion as rivals like Google and Facebook entered the limelight. Since then, Yahoo's star has slowly been flickering -- Flickr'ing? -- out.

Mayer: 'I plan to stay'

In an attempt to right the ship, Yahoo brought in then-Google executive Marissa Mayer as CEO in 2012. She was the company's fifth leader in five years. Her plan was to remake the company for the mobile era, reworking each one of the company's services to focus on capabilities for mobile devices.

Mayer also tried to make the company a premier media destination, hiring well-known personalities like journalist Katie Couric and acquiring the rights to high-profile shows like the sitcom "Community." But many of her media bets failed. In January, Yahoo shut down Screen, its video service for original content and admitted it never figured out a way to make money off "Community."

Mayer indicated her time with Yahoo was not yet over.

"I plan to stay,"

she said on a conference call with analysts. "I love Yahoo. I'm excited to see it into the next chapter."

The combined Yahoo and AOL assets will fall under Marni Walden, a Verizon executive vice president and president of product innovation and new businesses.

Yahoo CEO Marissa Mayer may stick around after the deal is closed.

Justin Sullivan, Getty Images

While Yahoo will bring eyeballs to Verizon, some questioned whether it's the right kind of audience. Jeffries analyst Mike McCormack noted that Yahoo's user base tends to run older, which is counter to Verizon's intent to go after millennials with products like its Go90 mobile video service.

"We wonder whether big bets on technology acquisitions is the appropriate direction for Verizon," he said in a research note.

Yahoo first announced it was exploring a sale in February after coming under pressure from shareholders, particularly hedge fund Starboard Value. Other suitors in the running included a group led by Quicken Loans founder and Cleveland Cavaliers owner Dan Gilbert, with the financial backing of investor Warren Buffett. Still, Verizon was the heavy favorite to buy Yahoo from the beginning.

With the sale, the telecom company gets a still heavily trafficked site: Yahoo says a billion people a month visit all of its properties combined. But the key to the buyout is Yahoo's precious advertising technology, which Verizon will add to its war chest.

Verizon's reach -- it has 112.6 million retail wireless customers as of the first quarter -- should help Yahoo shore up its efforts to get people using its mobile apps, Mayer said.

"Verizon and its distribution on mobile can be very helpful," she said.

In early trading Monday, Yahoo's shares were down more than 2 percent to about $38.50, and Verizon's slipped a half-percent to about $55.80.

The sale does not include Yahoo's shares in Alibaba Group Holdings or its shares in Yahoo Japan.

The companies expect the deal to close in the first quarter of 2017.

-Jonathan Skillings and Roger Cheng contributed to this story.

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