US telco Verizon Communications is looking at getting rid of its media assets including Yahoo and AOL – yet another non-media company taking a massive loss because of its failure in the digital media space.
Private-equity firm Apollo Global Management is said to be an interested buyer. At one stage a decade ago, it was one of the two owners and rescuers of the Nine network in Australia, now will it do the same for Yahoo and AOL?
Verizon could get as much as $US4 billion – roughly 50% of the $US9 billion (now heavily written down) paid for the two businesses. That seems too high given the way the online giants like Facebook and Google and a host of rivals are growing their ad revenues inside and outside of the US.
Alphabet, Google’s owner, boosted ad revenues and overall revenues by a third in the three months to March and Facebook reported a 48% jump in its total revenues, with a big surge in ad income.
Verizon paid $US4.4 billion for AOL in 2015 (in a former deal two decades ago it had a brief paper market value of $US190 billion), and paid $US4.5 billion for Yahoo in 2017.
That year, the two entities were merged into a media company called Oath, which was later renamed Verizon Media after writing down its value by $US4.6 billion.
In 2013 the micro-blogging site Tumblr was purchased by Verizon for $US1.1 billion; six years later, it sold for a paltry $US3 million to Wordpress.com’s owner, Automattic and last year Buzzfeed bought Huffington Post from AOL for an undisclosed amount of shares placed with Verizon.
Verizon is not alone in making dud deals. News Corp has lost a billion or more on digital dalliances, starting with MySpace, the pre-Facebook company. It then lost money on buying video ad companies, online education and had a brief flirtation with an online-only newspaper. It is now making money out of online real estate listings in Australia and the US.
Seven West Media got into bed with Yahoo and finally existed after around $200 million in losses and write downs.
The story is the same – Google, Facebook and now Amazon (with Apple and Snap starting to be felt) are eating more and more of digital advertising in the US and abroad.
So all those bleating legacy media companies shouldn’t rest on their recently struck revenue deals with Google and Facebook. These digital giants are coming again and those agreements won’t protect online revenues.
The death toll among digital news and media sites in the US is growing longer and longer and Yahoo and AOL are heading in that direction. if sold this will be their third set of owners in 20 years.
