What have you always wondered about the economy? Tell us

Is Yahoo’s Internet business worth $3 billion?

Mark Garrison Jun 7, 2016
HTML EMBED:
COPY
Yahoo! President and CEO Marissa Mayer delivers a keynote during the Yahoo Mobile Developers Conference on February 18, 2016 at The Masonic in San Francisco, California. Stephen Lam/Getty Images

Is Yahoo’s Internet business worth $3 billion?

Mark Garrison Jun 7, 2016
Yahoo! President and CEO Marissa Mayer delivers a keynote during the Yahoo Mobile Developers Conference on February 18, 2016 at The Masonic in San Francisco, California. Stephen Lam/Getty Images
HTML EMBED:
COPY

Verizon reportedly thinks Yahoo is worth $3 billion. That’s according to the Wall Street Journal reporting on the bidding for Yahoo’s core internet business. Verizon and Yahoo declined to comment.

Valuation can be complicated, but it comes down to something quite simple. The value of something is whatever the highest bidder is willing to pay.

“You can say that the beauty is in the eye of the individual beholder, or in this case, the individual bidder,” said Donna Hitscherich, a Columbia Business School professor and former investment banker. “The beauty is what this asset does.”

Instead of a company, think of an old racehorse. It’s worth nothing to someone dreaming of a Triple Crown, but could sell a lot of tickets at a petting zoo. Now remember that Verizon already has AOL. If it gets Yahoo, it’ll have a petting zoo for fallen 1990s internet properties.

If Verizon is serious about getting bigger in digital media and advertising, Yahoo’s content and billion users could help. But whether it’s enough to justify a reported $3 billion price tag, ultimately comes down to the labor of people stuffed in conference rooms, hunched over spreadsheets. Staffers from Verizon and other potential bidders crunch the numbers, with help from banking and legal advisers. Some things they know, like how Yahoo has done in the past. But the ultimate bid rests on assumptions, of how there might be more money in doing things differently.

Verizon may be able to form a better picture than other potential bidders because of its purchase of AOL.

“The assumptions they are using are based on their knowledge from the AOL experience,” said Northeastern University business professor Steven Kursh. “They have already, if you will, seen the movie before.”

But no spreadsheet says for sure how the movie ends. And sometimes it can take a while to figure out whether a company overpaid.

Marketplace is on a mission.

We believe Main Street matters as much as Wall Street, economic news is made relevant and real through human stories, and a touch of humor helps enliven topics you might typically find…well, dull.

Through the signature style that only Marketplace can deliver, we’re on a mission to raise the economic intelligence of the country—but we don’t do it alone. We count on listeners and readers like you to keep this public service free and accessible to all. Will you become a partner in our mission today?

Your donation is critical to the future of public service journalism. Support our work today – for as little as $5 – and help us keep making people smarter.