Why Verizon wants to buy an ailing Yahoo

Why Verizon wants to buy an ailing Yahoo

Two years ago -- an epoch in Silicon Valley time -- AOL chief executive Tim Armstrong proposed a merger to Yahoo chief executive Marissa Mayer.

Both Armstrong and Mayer were ex-Googlers hired to run and rescue these formerly marquee internet destinations. But AOL and Yahoo were struggling in increasingly mobile online world  dominated by Google and Facebook.

Mayer rejected Armstrong's offer.

But now that AOL-Yahoo merger could take place in a wholly unexpected manner -- thanks to Verizon, the largest U.S. phone carrier. Last year, Verizon bought AOL for $4.4 billion. It now appears to be nearing a deal to buy Yahoo, as well.

Verizon is in final negotiations for a $5 billion deal for Yahoo's web business, according to reports in Bloomberg and Recode. Recode reported the deal could be announced as early as Monday. Verizon and Yahoo both declined to comment Sunday.

Verizon was always seen as one of the most likely suitors for Yahoo, which has been officially for sale since April, after several years of failed turnaround plans executed under Mayer.

If Verizon buys Yahoo, Tim Armstrong would in many ways be getting the merger he once wanted.

Armstrong, who heads up Verizon's AOL unit, is expected to be a key player in whatever Yahoo’s future may be.

Armstrong could not be reached for comment. But a reading of his tenure at AOL offers some insight into what the future might mean for Yahoo, which would likely turn into much more of a focused advertising company.

AOL is still heavily involved in media content, thanks to its ownership of the Huffington Post, but even with those businesses it has kept a strong advertising focus.

Many admire Armstrong for sticking with AOL, said Eric Jackson of SpringOwl -- a firm invested in Yahoo that has been very critical of Mayer’s tenure at Yahoo.

“​He could have quit a couple of years into it,” Jackson said. “Many people say to me they wouldn’t do business with AOL if it was anyone but Tim Armstrong.”

Landing Yahoo, too, would provide Verizon with a sizable cut of the U.S. online market. Yahoo and AOL might not be trendy names, but they ranked No. 3 and No. 6, respectively, in comScore’s list of the top digital media properties in the U.S. in February.

Add AOL and Yahoo together, and their unique visitors were 50 percent greater than No. 1 Google.

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