Why Is AT&T Interested In Yahoo’s Internet Assets?

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AT&T (NYSE:T) has reportedly made a bid for Yahoo’s core Internet assets, challenging key rival Verizon (NYSE:VZ) which has thus far been seen as the front-runner in the auction. [1] Below we take a look at a few possible reasons why AT&T might be interested in Yahoo’s business (related: Verizon Is Preparing To Bid For Yahoo’s Internet Business. How Much Is It Worth?).

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  • Acquiring Yahoo could potentially give AT&T a quick entry into the burgeoning mobile advertising market, allowing it to compete with Verizon as well as Internet companies such as Google.  U.S. mobile ad spending is expected to grow 38% this year to $42 billion, according to estimates from eMarketer, accounting for roughly 21.6% of total media ad spending and 62.6% of digital ad spending. ((Mobile to Account for More than Half of Digital Ad Spending in 2015, eMarketer, September 2015))
  • AT&T has become a major player in the content distribution space following its 2015 acquisition of DirecTV. Online and mobile streaming will become a more important part of the distribution model, with the carrier slated to launch three new online streaming options for DirecTV later this year. AT&T could potentially pair Yahoo’s advertising technologies with its upcoming video services.
  • Besides advertising, Yahoo also has a reasonably solid portfolio of online services and content that AT&T could monetize.  Yahoo has a base of 1 billion+ monthly active users on online properties including Search, Mail, Finance and Tumblr. Yahoo has also invested in content, with a focus on news, finance, sports and lifestyle. This could complement AT&T’s premium DirecTV content.
  • AT&T also has the wherewithal to finance the deal, with a market cap of over $235 billion and more than $10 billion in cash.
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Notes:
  1. AT&T Wants Yahoo’s Internet Business, Bloomberg News, May 2016 []