With deadline-day looming on 18 April, by which time all bids must be in, it is time to give you a run-down of the potential purchasers of Yahoo’s business. The one-time tech giant is for once the star of the show, with a variety of companies considering buying its core business, which was put up for sale in February of this year. Despite media reports of 40+ bidders being in contention, ADTEKR has considered what it believes to be a short-list the most likely (and most interesting) potential suitors.
There a number of attractive elements that Yahoo still has to offer. With its strong editorial operations in finance, sports and video, Yahoo attracts a substantial number of users. Additionally, Yahoo’s more successful offerings include Tumblr, Flickr, Yahoo Mail and its Q&A site. Ofcom reported last year that on mobile, Yahoo’s sites were amongst the ten most popular properties for all comparator countries (being UK, France, Germany, Italy, USA, Japan, Australia and Spain). It has been estimated that Yahoo has more than 1 billion active monthly users and together with this large user base comes a very attractive volume of data.
Another key asset is Yahoo’s IP – reportedly Yahoo owns around 6,000 patents. In its 2015 year-end earnings, Yahoo claims that a sale of its non-strategic patents, real estate and other non-core assets could raise up to $3 billion. Potential buyers may also be interested in Yahoo’s not yet launched voice-controlled search tool (Index), which is likely contain innovative features they wish to integrate into their own products.
However, the reputation as a jack-of-all-trades has also formed part of Yahoo’s curse. Users could never quite pinpoint exactly what “Yahoo” was – and this was reflected internally within the business itself. Its lack of distinct identity is now demonstrated by the interesting mix of potential bidders, each eyeing different features of Yahoo’s business.
Daily Mail and General Trust (DMGT)
DMGT, owner of the Daily Mail, has confirmed that it is considering a bid for Yahoo. The Daily Mail has been pushing into the digital space and is particularly keen on Yahoo’s significant US audience, the US now being its prime source of revenue growth. With its UK audience numbers edging closer to saturation, acquiring Yahoo’s audience could be a significant boost the Daily Mail’s online presence. Offering combined Yahoo/Daily Mail ad real estate would likely draw attention from big US ad-buyers and lead to a better monetisation of the Daily Mail’s online offerings.
It is unlikely that DMGT would buy Yahoo outright and it has confirmed that it is in discussions with other potential bidders to see whether a deal can be made. Thus, an acquisition would probably be in collaboration with a private equity fund, with DMGT taking control of the news and media sites and the private equity fund getting the rest. A more radical approach would be to create a new company and combine both Yahoo’s and DMGT’s digital operations within, with DMGT being the majority shareholder and the private equity fund taking a smaller stake.
Following Verizon’s acquisition of AOL (our commentary here), acquiring Yahoo could be the next step in Verizon’s endeavour to compete at the top level of advertising. A combined AOL-Yahoo-Verizon could offer closed end-to-end advertising. As a Telco, Verizon holds an immense amount of data and has wide access to digital traffic. Similarly to AOL, which owned sophisticated adtech such as the programmatic video advertising platform adap.tv, Yahoo would contribute adtech of its own, most notably BrightRoll DSP (demand-side platform) and BrightRoll Exchange, to complement Verizon’s position. However, on top of the technology, Yahoo’s large user-base is very attractive. Verizon would be able to control the data flow from and to the user entirely and limit external players’ access. Used well, Verizon would be in a position to deliver much more personalised ads than its competitors.
Google or Microsoft
Yahoo uses both Google and Microsoft-owned Bing to populate its search engine. This means that Google and Microsoft both have some skin in the game. They may lose their respective deals, if Yahoo’s buyer choses to discontinue the partnership. It seems unlikely that either is going to buy Yahoo outright. Microsoft has tried to stage a hostile takeover of Yahoo in 2008 and Google might not want to risk further competition law issues. There is also the interesting aspect of Yahoo’s CEO Marissa Mayer, having jumped ship from Google before taking the lead at Yahoo. Both Companies may, however, help finance a third party’s bid to secure their commercial interest and competitive position.
Private equity firms General Atlantic, TP and KKR are also reportedly interested in a bid for Yahoo. A private equity acquisition might see Yahoo broken up into different pieces with the less profitable elements seizing to exist. Other names that have been thrown into the ring are Time Inc, AT&T, Comcast and Softbank. However, although each has its own business reason for a potential purchase, it seems unlikely that this would be sufficient to justify the not-insubstantial cost of a Yahoo acquistion.
Due to the varied mix of Yahoo assets, any sale is likely to be a complicated and time consuming process. However, Yahoo’s brand will probably remain in one form or another. With the wide range of potential mergers – it will certainly be interesting to see the end result.