For digital history buffs, Verizon’s $5 billion sale today of its Yahoo-AOL media group to Apollo is an opportunity to take a stroll down memory lane, marveling at how much the value of the two former internet titans has shriveled in 20 years. But the pitiful amount of money the business fetched isn’t just of academic interest—it's a travesty for Verizon shareholders.
What possible explanation can there be for Verizon to sell a business that generated $7 billion in revenue last year, at what is probably a 10% profit margin, for less than one times revenue? The price implies a 34% drop in the value of the businesses from what Verizon paid to acquire them in separate deals in 2015 and 2017. The combined business has declined a little since then—its revenue shrank 9% between 2018 and 2020, although it grew 10% in the first quarter—but not enough to account for the sale price. And under different management, what will now be called Yahoo might be able to grow even faster, given how well the rest of the digital media sector has been doing.