Private equity firm Apollo believes it has finally come up with a way to deliver on Yahoo’s promise.
After being turned into the graveyard of the successors of the respected but faded online leading media and technology industry leaders, it probably won’t pay to predict success anytime soon.
New York-based investment firm Agreed earlier this week To provide b 5bn to the communication giant Verizon for Yahoo, including a set of AOL and other digital media features it collects.
The deal represents a theft compared to Microsoft’s o 44.6 billion offer that Yahoo rejected 15 years ago. Microsoft had hoped it could use the Internet portal company to create an online platform to compete with Google, which it saw as a major threat to its software dominance.
It also casts a shadow over Yahoo’s stock market price in the years that followed, as it became the target of repeated overtures from private equity firms as the company sought to buy and break up. Most focused on Alibaba, the Chinese ecommerce company of Yahoo’s partnership, which grew to outperform the declining value of Yahoo’s own business.
And more than half of what Verizon paid for Yahoo in 2017, coupled with the AOL it bought commercially two years ago. Behind the plan, former Google executive Tim Armstrong believed he could create an advertising platform to compete with Google and Facebook.
The sheer size of Yahoo’s online audience is behind many of these dreams. In addition to China, it ranks as the fifth most popular website in the world, judging by the combination of visitor numbers and time spent on the site, according to web measurement agency Alexa.
In a sense, interest in the Apollo company is no different. David Samber, co-head of private equity at Apollo, said Yahoo’s 900m monthly active users are considered a “huge audience” that presents “tons and tons of opportunities”. Less than 5 per user, the purchase price is a bargain for internet dealing.
Compared to other buyers, however, Yahoo’s newest owner is starting with a brief focus: pick several thousand promising assets from Yahoo’s portfolio, put more weight behind them, and refrain from relying heavily on advertising that has failed. Employed, but left unsaid, rejecting those parts of Yahoo’s business that don’t even have employees.
Two perennial problems have weighed on Yahoo. One of these is to focus the attention of consistent leaders or invest enough behind the company’s best opportunities, said Brian Weiser, who covered Yahoo as an Internet analyst for several years. He said the company has managed to explode many different markets by teaming up with the silos it has managed. In a famous internal memo a decade and a half ago, this criticism led an executive to warn that his strategy was Spread thin as peanut butter.
Yahoo is still working on that legacy. For example, this Tuesday Yahoo brought a Closer of Answers, a Q&A service that lasted for many more years, without losing sight of new services. Sites like this still attract millions of users and attract an enthusiastic community of users, which means the company is working too slowly to shut them down, said a former Yahoo executive.
Second, the relative failure was the company’s inability to address a fundamental question: whether it was a media or technology company. The question was first published during the tenure of former filmmaker Terry Semmel, who ran the company after a boost from Dotcom and pushed it heavily into online media.
When that strategy failed, the company’s board tried to reverse the course by hiring Marissa Mayer, a former top product manager at Google. However, some of his initiatives were able to generate positive reviews, and with the acquisition of Tumblr he took Yahoo to social media, none of which achieved a scale or speed to match the company’s main competitors.
Armstrong’s own plans for Yahoo have also left it in an uncomfortable position to expand the world of technology and media, two people who have watched his efforts from close people.
Its stated goal is to merge with AOL to create an “adtech” platform capable of competing with giants like Google. But his real interest lies in the group’s extensive media portfolio of assets, one said. Another said that after Yahoo bought Verizon, the company’s center of gravity inevitably moved to New York, which reduced the company’s developers’ impact on its direction.
Apollo’s intentions towards Yahoo provide partial answers to some of the long-running problems. Above all, Yahoo will strengthen its focus on markets where it already has a strong presence and develop new types of revenue outside of advertising.
Sports bets are high on the list. Yahoo has already been working for several years to clear regulatory barriers to betting, the former official said, and it partnered with MGM in 2012 to provide a service to millions of users participating in its fictional sports league.
Apollo now claims that its own foothold in the gambling world puts Yahoo Sports in a good position to become a powerful online gaming and sports betting platform. The investment firm acquired Horh’s Entertainment, the largest U.S. gaming empire, in 200 US dollars, with rival buyout group TPG paying 31 31 billion, although the company, which was later named Caesar, later went bankrupt. It also adopted Gala Coral in 2010 and later merged with Ladbrook to compete with British competing bookmaker William Hill.
Most recently, Apollo Las Vegas Sands acquired Marquee Resort and Casino de Veniceians for ২ 2.22 billion, Great Canadian Gaming for $ 2.5 billion and Italian sports-basing group Gamenet.
“Apollo has a lot of experience with gaming and sports betting. I think Yahoo Sports is in a good position to maximize the value of opportunities, ”Sambur said.
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Yahoo Finance, one of the crown jewels of the long company, may present another opportunity to go beyond advertising. Apollo is considering tapping into its huge audience, which currently consists of creating more profitable businesses, including providing access to financial services products by retail investors using free tools and news streams.
“I see the brand as a great opportunity to monitor their lot of user base in other areas related to money,” Samber said. The private equity firm is exploring whether Yahoo Finance could transform into something more profitable, such as a stockbroker or cryptocurrency business like Robinhood.
Even using it as open to go beyond advertising, Apollo still needs to succeed where previous Yahoo owners have failed: competing with Google, Facebook and Amazon to turn its enviable viewers into more attractive drawings for advertisers.
“There’s a lot of space between where we are and where those guys are,” Sambur said. “This market is so big that closing even the smallest gap would create great value.”
Anna Nikolau Additional Reporting