Verizon’s buy of Yahoo will fuel growth of new mobile video, ad business

Verizon, the odds-on favorite to buy Yahoo, today finalized the deal, paying $4.83 billion for Yahoo’s Web assets and in the process expanding its digital advertising business.

The all-cash deal gives Verizon real estate and Web assets, but doesn’t include some intellectual property, which Yahoo plans to sell separately, nor does it affect Yahoo’s Alibaba and Yahoo Japan holdings, which are worth an estimated $40 billion, according to Bloomberg.

Yahoo is the second big Internet company Verizon has purchased; it bought AOL for $4.4 billion last year and is expected to close in the first quarter of 2017.

Verizon, which at one point rapidly gained share in the pay-TV sector, has been scaling back its FiOS TV service and looking instead to mobile delivery of TV services. It’s the largest wireless operator in the U.S. and is aggressively looking to mobile services, especially video, to supplement – and likely eventually replace – revenue from its traditional pay-TV business.

The Yahoo acquisition allows it to leverage data from both Yahoo and AOL to offer better targeted advertising to its 100 million wireless customers.

The mashup strengthens Verizon’s place in the digital ad market, as it will now have access to programmatic ad tech from BrightRoll and Flurry and to the more than 1 billion monthly users Yahoo still reaches.

“Yahoo gives us scale that is what is most critical here,” Marni Walden, who is head of product innovation and new business at Verizon told CNBC. “We want to compete and that is the place we need to be.”

Added AOL Inc. Chief Executive Officer Tim Armstrong, “We have enormous respect for what Yahoo has accomplished: this transaction is about unleashing Yahoo’s full potential, building upon our collective synergies, and strengthening and accelerating that growth. “Combining Verizon, AOL and Yahoo will create a new powerful competitive rival in mobile media, and an open, scaled alternative offering for advertisers and publishers.”

Stay tuned.

Jim O’Neill is Editor of Videomind and Principal Analyst at Brightcove. You can follow him on Twitter @JimONeillMedia and on LinkedIn