Dive Brief:

• Verizon has reached an agreement to acquire Yahoo's operating assets—primarily its internet business as well as some real estate—for $4.8 billion in cash, according to a company release.
• The deal is subject to the usual closing conditions, including approval from Yahoo shareholders and federal regulators, and is expected to close in Q1 2017. 
• Yahoo has been on the auction block for some time. As of June, the finalists to acquire the company were Verizon, AT&T and a consortium led by Quicken Loans Founder Dan Gilbert and backed by Berkshire Hathaway Chairman Warren Buffett.

​Dive Insight:

The Yahoo deal will help Verizon build on its foothold in the digital media business and create "one of the largest portfolios of owned and partnered global brands with extensive distribution capabilities," according to the company. The Yahoo acquisition is another piece in Verizon's strategy to improve its digital media footprint and match it with its existing mobile user base. 

“Yahoo and AOL popularized the Internet, email, search and real-time media," Yahoo CEO Marissa Mayer said in a statement. "It’s poetic to be joining forces with AOL and Verizon as we enter our next chapter focused on achieving scale on mobile."

The deal will give Verizon 1 billion new monthly active users, including 600 million monthly active mobile users, according to the company. Verizon plans to integrate Yahoo's internet assets with AOL, which it acquired last year for $4.4 billion.

Yahoo has been forced to sell after its internet business struggled to regain the prominence it achieved during the early years of the internet. Once an internet giant unto itself like Google and Facebook, Yahoo's market value gradually eroded over the years, dwindling down from over $125 billion to a roughly $37 billion market cap today. The company has been simplifying its business model while focusing on mobile, video, native and social.

While Yahoo's business has been shrinking, the remaining giants of the online advertising world, Google and Facebook, have dominated the market. According to Mary Meeker, Google and Facebook accounted for 76% of all U.S. internet advertising spend in 2015. 

“The headwinds for all large players not named Google and Facebook are very real," Pivotal Research analyst Brian Wieser told the Journal about the deal. "Noticeable growth only has a chance to come with ongoing investment, whether M&A or internal.”

The Wall Street Journal reports that Yahoo will make up 3.4% of U.S. digital advertising spend this year, according to eMarketer, but that number has been getting smaller over the years. Verizon's business, which includes AOL, will make up 1.8%. While Yahoo has been rapidly losing market share, bidders such as Verizon were attracted by the company's still-impressive market share. The fact that the company will receive 3.4% of all digital ad dollars spent in the U.S. this year is a testament to the strength of the business that Yahoo built in the early years of the internet. 

Customer data is a big piece of the deal for Verizon. After its deal with AOL, Verizon combined AOL's ad network with mobile super cookie data that offered highly personalized targeting capabilities that can match internet use with Verizon customers’ mobile data. However, the Federal Communications Commission (FCC) cracked down on the Verizon this year, slapping the telecom giant with a $1.35 million fine for tracking its mobile customers without the proper disclosure and without giving users the ability to opt-out. Yahoo's assets will bring more customer data to the table for Verizon. 

Current Yahoo CEO Marissa Mayer isn’t likely to have a role in Verizon's version of Yahoo, sources told the Journal.