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Illustration: Aïda Amer/Axios

The upcoming sale of Yahoo and AOL to a private equity firm for $5 billion represents a massive media markdown.

By the numbers: At their dotcom bubble peaks, Yahoo and AOL were valued at more than $125 billion and $200 billion, respectively, or $193 billion and $318 billion in 2021 dollars.

  • Yahoo twice turned down offers to buy Google at a fraction of its cost today. AOL held conversations with Facebook and YouTube in 2006, but ultimately failed to buy either company.
  • The combined value of both companies is now 187 times less than Facebook's market cap and 318 times less than Google's.

The big picture: A string of bad investments and deals wreaked havoc on both firms, culminating in Monday's announcement of a deal to sell to private equity giant Apollo Global Management.

  • AOL made one giant mistake. It famously bought Time Warner for $182 billion in cash and stock in 2000, saddling the company with debt just before the dotcom bubble burst and the rise of broadband made AOL's dial-up services virtually obsolete. While the deal may have helped AOL survive parts of the crash, the failure to execute on a vision for the combined company during a time of economic turmoil ultimately left AOL with unmanageable losses.
  • Yahoo, on the other hand, spent years making lots of smaller bad deals. It spent nearly $10 billion in 1999 buying GeoCities and Broadcast.com, both of which the company eventually shut down. It spent $1.1 billion on Tumblr in 2013, and sold it for less than $3 million in 2019. It sold half of its 40% stake in Alibaba for $7.6 billion in 2012, two years before Alibaba went public for 5 times more. It rejected a $44.6 billion takeover offer from Microsoft in 2008, only to sell to Verizon for 10% of that value less than ten years later.

What went wrong at Verizon: Verizon acquired Yahoo for $4.48 billion in 2017 and AOL in 2015 for $4.4 billion. The deals were meant to give the telecom giant lots of data so that it could sell targeted advertising against its media assets.

  • But it quickly became clear that the data-based ad play wouldn't work, as it was too difficult to compete with the marketing prowess of Google and Facebook.
  • Tim Armstrong, who was hired in 2015 to run Verizon's media operation, left abruptly in 2018, about a year after the Yahoo deal.
  • CEO Hans Vestberg, who became CEO of Verizon in 2018, quickly abandoned plans to invest in the media arm. Verizon took a $4.6 billion write-down for its media unit in late 2018, and failed to invest meaningfully after that.
Data: Company earnings reports; Chart: Axios Visuals

The big picture: Verizon's rivals have also invested in giant media companies, but those deals have borne more fruit in the streaming era.

  • AT&T acquired Time Warner's media assets in 2018 for $85 billion. It's since used those assets to build its streaming service HBO Max.
  • Comcast purchased NBCUniversal in 2011, and it has since used that content to build its ad-supported streaming service Peacock.
  • AOL and Yahoo both lack the premium video assets needed to build a streaming service.

What's next: Verizon's media assets still pull in massive amounts of traffic, and Apollo sees an opportunity to juice more money out of Yahoo and AOL's brands by investing in their ad tech. Sources say Apollo is interested in working with a casino sportsbook to license the Yahoo Sports brand.

Go deeper

Felix Salmon, author of Capital
Jul 29, 2021 - Economy & Business

Giant earnings growth for the world's largest companies

Illustration: Aïda Amer/Axios

Never in the history of capitalism have the world's biggest companies grown as fast as the tech giants in recent years.

Why it matters: A series of stunning earnings reports this week — with another one likely to arrive Thursday afternoon, from Amazon — has underscored the astonishing growth among a group of companies that were already some of the most profitable of all time.

In photos: Tokyo Olympics day 9 highlights

Team USA's Ryan Murphy, Zach Apple, Michael Andrew and Caeleb Dressel celebrate winning gold in the final of the men's 4x100m medley relay swimming event during the Tokyo 2020 Olympic Games at the Tokyo Aquatics Centre in Tokyo on Aug. 1. Photo: Odd Andersen/AFP via Getty Images

Day nine of the Tokyo Olympic Games Sunday saw the final day of swimming competition end with a historic win for Team USA.

The big picture: The U.S. men's 4x100-meter medley relay team set a new record world as they won the final and Caeleb Dressel earned a fifth gold — becoming the fifth American to do so. Team USA's Bobby Finke won the 1,500-meter freestyle.

Trump PACs raise over $82M for first half of 2021

Former President Trump during the Conservative Political Action Conference in Dallas, Texas, on July 11. Photo: Brandon Bell/Getty Images

Former President Trump's political action committees (PACs) raised more than $82 million in the first half of 2021, per Federal Election Commission filings published on Saturday.

Why it matters: It's a significant amount for a former president who's been banned from major social media platforms. It demonstrates his ability to raise huge sums of money should he choose to run for the presidency for a third time.

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