Verizon bought Yahoo's core assets for billions, but analysts and industry insiders can't seem to agree on which company got the better deal from the acquisition announced Monday.
The transaction makes Verizon much more important to the digital advertising industry, according to Brian Wieser, senior research analyst at Pivotal Research.
"Verizon represents the legacy inventory associated with Verizon as an ISP, the legacy AOL inventory, the bulk of Microsoft’s global display inventory and now Yahoo, the company probably captures somewhere around $8-9bn of gross ad revenue and more $4-5bn in net ad revenue," Wieser wrote in a research note published Monday.
Wieser estimates that the acquisition ranks Verizon as No. 3, behind Google and Facebook, in terms of digital advertising sales.
Verizon's looking to scale and grow AOL's mobile services and programmatic advertising products. "Returning Yahoo’s core business to growth and driving costs out of that business will be among the primary challenges Verizon will have to face in order to retain that position," Wieser wrote.
AOL CEO Tim Armstrong has long sought this type of deal, and the combination of Yahoo and AOL backed by Verizon will allow the combined companies to become much more profitable combined than separate, Ben Schachter, Macquarie Capital analyst, wrote in a research note.
Mark Ballard, senior director of research at ad agency Merkle, said to become more profitable, scale becomes the single biggest reason to strike this deal.
"One plus one can sometimes equal a little more than two," Ballard told Search Marketing Daily.
Despite Yahoo's troubles with monetizing its sites through search and display campaigns, the brand has staying power.
Yahoo's greatest failure is a lack of brand identity, but its greatest assets is the brand, according to Shar VanBoskirk, VP and principal analyst at Forrester Research. "For all the wobbliness of Yahoo's brand identity, the Yahoo brand still holds a lot of consumer-affinity. Consumers LIKE the Yahoo brand,” VanBoskirk wrote in a blog post.
Global Equities Research Managing Director Trip Chowdry believes Yahoo got the better deal and there's little value for Verizon. Even with the success of the AOL acquisition, Chowdry points to Verizon's "disastrous" acquisition of the data center operator Terremark Worldwide in 2011 for $1.4 billion to expand cloud services. Perhaps Verizon was a little early to market.
Chowdry points to Yahoo's inability to lead in many of the technology trends such as machine learning, visual, real-time, live streaming, mobile and social.