SAN FRANCISCO — Yahoo was the front door to the web for an early generation of internet users, and its services still attract a billion visitors a month.
But the internet is an unforgiving place for yesterday’s great idea, and Yahoo has now reached the end of the line as an independent company.
The board of the Silicon Valley company has agreed to sell Yahoo’s core internet operations and land holdings to Verizon Communications for $4.8 billion, according to people briefed on the matter, who were not authorized to speak about the deal before the planned announcement on Monday morning.
After the sale, Yahoo shareholders will be left with about $41 billion in investments in the Chinese e-commerce company Alibaba, as well as Yahoo Japan and a small portfolio of patents.
That compares with Yahoo’s peak value of more than $125 billion, reached in January 2000.
Marissa Mayer, Yahoo’s chief executive, is not expected to join Verizon, but she is due to receive a severance payout worth about $57 million, according to Equilar, a compensation research firm.
Verizon and Yahoo declined to comment on the deal.
Founded in 1994, Yahoo was one of the last independently operated pioneers of the web. Many of those groundbreaking companies, like the maker of the web browser Netscape, never made it to the end of the first dot-com boom.
But Yahoo, despite constant management turmoil, kept growing. Started as a directory of websites, the company was soon doing much more, offering searches, email, shopping and news. Those services, which were free to consumers, were supported by advertising displayed on its various pages.
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For a long time, the model worked. It seemed as if every company in America — and across much of the world — wanted to reach people using the new medium, and ad revenue poured into Yahoo.
In the end, the company was done in by Google and Facebook, two younger behemoths that figured out that survival required a continuous process of reinvention and staying ahead of the next big thing. Yahoo, which flirted with buying both companies in their infancies, watched its fortunes sink as users moved on to apps and social networks.
Verizon, one of the nation’s biggest telecommunications companies, plans to combine Yahoo’s operations with AOL, a longtime Yahoo competitor that Verizon acquired last year. The idea is to use Yahoo’s vast array of content and its advertising technology to offer more robust services to Verizon customers and advertisers. Bloomberg first reported the price of the transaction.
Ms. Mayer, who was hired as Yahoo’s chief executive four years ago but failed to halt its decline, was nevertheless rewarded handsomely for her efforts. Including the severance, she will have received cash and stock compensation worth about $218 million during her time at Yahoo, according to Equilar’s calculations.
Created by two Stanford graduate students, Jerry Yang and David Filo, Yahoo was originally a hand-selected directory to the nascent World Wide Web, but it quickly expanded its ambitions.
“Yahoo is where you start,” Jeff Mallett, the company’s first chief operating officer, explained during a 1996 interview with a job candidate, Dan Finnigan. Mr. Finnigan, now the chief executive of Jobvite, said that he was skeptical of Yahoo’s quest to dominate every category of content, but he later joined the company to run its HotJobs division.
Google, which emerged a few years later, used a superior, more automated approach to indexing the web. Under its first chief executive, Timothy Koogle, Yahoo struck a four-year deal with Google in June 2000 to make Google’s search engine the default on its website. Yahoo’s leaders also tried to buy Google but eventually settled on building their own search tool.
While Google was singularly focused on search, Yahoo recast itself as a content company under its second chief executive, Terry Semel, who succeeded Mr. Koogle in 2001.
By the mid-2000s, Yahoo was struggling. Web portals, as they were called, were fading in importance, and social networks like Facebook were emerging as powerful competitors for people’s attention. Google had become the world’s dominant internet company through its search engine and its lucrative search ads.
In 2007, Mr. Semel was pressured to resign and Mr. Yang took over as chief executive. The next year, Mr. Yang rebuffed a $44.6 billion acquisition offer from Microsoft, even after Microsoft sweetened it substantially, infuriating many Yahoo shareholders.
Yahoo then went through two more chief executives and two interim bosses in about three years, before hiring Ms. Mayer, a former Google search executive and tech celebrity, in July 2012.
Despite her acclaim, Ms. Mayer failed to resolve Yahoo’s central problem: a lack of focus.
She vowed to make Yahoo an innovator in search again, devoting 1,000 people to the cause. She commissioned original video content, hired the former TV anchor Katie Couric and opened “digital magazines” on topics like food, travel and tech. She acquired dozens of companies, including the blog network Tumblr.
Although those initiatives bore little fruit, Yahoo had one major asset that kept investors placated. In 2005, the company had purchased 40 percent of Alibaba for $1 billion in cash and the transfer of Yahoo’s Chinese internet assets to Alibaba. Although Yahoo sold much of that stake in subsequent transactions, when Alibaba went public in 2014, Yahoo still owned 15 percent of the company, worth about $31 billion.
The Alibaba offering put pressure on Ms. Mayer to come up with a plan to distribute that windfall to shareholders and prove that her turnaround plan was working.
She faltered on both fronts. Her plan to spin off the Alibaba stake into a separate company was abandoned amid concerns that it would incur a large tax bill. And Yahoo’s revenue and profit continued to decline.
“She knew she was holding a melting ice cube in her hand. Rather than focus on slowing down the rate it was melting, she said, ‘Let’s look three, four, five years out,’” said Sameet Sinha, an analyst at B. Riley & Company, who has followed the company for a decade.
Shareholders did not have that kind of patience. Jeffrey C. Smith, the chief of the hedge fund Starboard Value, began agitating for a sale of Yahoo’s core business, which would skirt the Alibaba tax issues. In February, Yahoo’s board agreed to seek bids for the business.
Mr. Finnigan, the former Yahoo executive, said that in hindsight, the company tried to compete in so many areas that it was difficult to succeed.
“You have to be Coke or Pepsi. You don’t want to be RC Cola. They let a lot of these verticals become RC Cola,” he said. “It is a sad day for those Yahoos who tried as hard as they did to create value.”
The New York Times
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