Dive Brief:

• Verizon entered an agreement to sell the majority of its digital media business, Verizon Media, to private equity firm Apollo Global Management for $5 billion, according to an announcement. Under the deal, Verizon will preserve a 10% stake in the group that owns Yahoo, AOL, TechCrunch and a smattering of ad-tech and publishing offerings.
• Following the transaction's close, which is expected in this year's second half, Verizon Media will be renamed to Yahoo while continuing to be led by current chief executive Guru Gowrappan. Verizon Media properties reach an estimated 900 million monthly active users, and Yahoo has placed new bets on apps like TikTok to engage Gen Z audiences.
• Signs of trouble have been apparent at Verizon Media for some time. Verizon previously sold off other brands, including social media site Tumblr in 2019 and HuffPost, which was acquired by BuzzFeed last year.

Dive Insight:

Verizon selling off its digital media business follows years of struggles to prop up a meaningful competitor to Facebook and Google. The telecom giant saw an opportunity to put a dent in digital advertising's duopoly by combining its muscle in the mobile space with the reach and name recognition of publishers like AOL and Yahoo. Verizon paid $4.4 billion for AOL in 2015 and $4.48 billion for Yahoo just two years later, eventually uniting its brands under a division called Oath.

But Oath's growth was sluggish while ad sales at other digital heavyweights skyrocketed. Verizon wrote down the value of Oath by $4.6 billion and rebranded the group as Verizon Media in late 2018. The unit has recently focused on developing interactive ad products, e-commerce solutions and sports betting offerings, including a virtual reality concept created in partnership with gaming operator Entain. In April, Verizon Media introduced a targeting solution meant to serve as an alternative to the third-party cookie. Next-Gen Solutions relies on contextual and real-time information like weather, location and device type to serve users with ads.

Now, Verizon is largely tapping out of the media business, preserving only a small stake in Verizon Media. The decision follows a comparatively strong period for the division. Verizon Media saw revenue jump 10.4% year-on-year to $1.9 billion in the first quarter of 2021 — its second consecutive quarter of double-digit growth — but those numbers are still dwarfed by rivals. Facebook recorded $25.44 billion in revenue in Q1 while Alphabet, Google's owner, notched $55.31 billion over the period.

Digital media has broadly been fortified by the pandemic, which has driven more consumers to streaming services and social media in the absence of live events. Yahoo News claims to be the fastest-growing news organization on TikTok, suggesting experiments with new channels could pay off for publishers.

At the same time, the digital space has become increasingly complicated to navigate with changing mandates around data and the deprecation of bedrock targeting tools like the cookie. Apple late last month also updated its tracking policies in a way that is expected to deliver a revenue blow to platforms including Facebook.

Other telecoms have hit bumps in the road in trying to build out digital media businesses. AT&T launched an advertising group called Xandr in 2018 to usher in the future of TV advertising and better capitalize on its $85 billion acquisition of WarnerMedia. Reports late last year indicated AT&T was exploring a potential sale of Xandr.