Yahoo (NASDAQ: YHOO) weathered the storm for as long as it could. But in the end, the Internet portal giant, whose presence has been a trademark since the dot-com bubble, was forced to abandon ship. One last final blow-- a dud of a gamble on Tumblr-- left the company sinking in a sea of corporate behemoths.
On July 25, it was reported that one of these behemoths, Verizon (NYSE: VZ), scooped up Yahoo's core internet business for $4.83 billion cash, a price-tag minuscule relative to the company's worth in 2000. Last year, Verizon bought AOL (NYSE: AOL) for $4.4 billion. Yahoo and AOL are ubiquitous of the Internet's infant stages, and now operate within the realm of one of the world's largest telecommunications companies.
What's left of Yahoo will become RemainCo, a rump company made up of shareholders who opposed the sale to Verizon. RemainCo still holds tremendous value, upwards of $40 billion, and will essentially operate as an investment group. Its holdings include: a 15% stake in China's internet giant, the Alibaba Group (NYSE: BABA); a 35.5% stake in Yahoo's Japanese subsidiary; the cash Yahoo has on its balance sheet; and several noncore patents intended for sale.
By expanding their digital business infrastructure, Verizon hopes to become equivalent in power with Google (NASDAQ: GOOGL) and Facebook (NASDAQ: FB), who lead the market for digital users and advertisers. Verizon will absorb Yahoo's consumer services, which includes its search, news, finance, sports, video, and email platforms, as well as Tumblr's social network. These services will complement a portfolio which now includes AOL and The Huffington Post.
The web-services Yahoo has developed will be of great value to Verizon. But most important will be Yahoo's data and information concerning the billions of users who visit their on a monthly basis, allowing Verizon to "leap forward from serving millions of customers to billions."
Yahoo experienced a sizable uptick in net income when Alibaba went public in 2014. However, in 2015, Yahoo lost $4.4 billion. Why the loss?
Most simply, Yahoo has failed to keep up with Google and Facebook. In May 2016, Google sites received 242 million users and Facebook received 209 million users, while Yahoo lagged, with only 204 million users. In 2009, Yahoo made up 10% of US digital ad revenue share. Today, their share is down to 3%, with Google at 39% and Facebook at 15%. Even Youtube, who in 2009 comprised nearly 0% of US digital ad revenue share, is doing better than Yahoo, currently at 4%.