Overview

Altaba (formerly Yahoo! Inc) (AABA), together with its consolidated subsidiaries, is a guide to digital information discovery, focused on informing, connecting, and entertaining its users through its search, communications, and digital content products. By creating highly personalized experiences, the company help users discover the information that matters most to them around the world—on mobile or desktop.

The company create value for advertisers with a streamlined, simple advertising technology that leverages Yahoo’s data, content, and technology to connect advertisers with their target audiences. Advertisers can build their businesses through advertising to targeted audiences on its online properties and services (“Yahoo Properties”) and a distribution network of third-party entities (“Affiliates”) who integrate its advertising offerings into their websites or other offerings (“Affiliate sites”). The company's revenue is generated principally from search and display advertising.

Altaba is proud of its rich history that has evolved with the Internet, beginning in 1994 when its founders, Jerry Yang and David Filo, then graduate students at Stanford University, created Jerry and Dave’s Guide to the World Wide Web, a simple directory of websites to help people navigate the Internet. Yahoo was incorporated in 1995 and is a Delaware corporation. The company completed its initial public offering on April 12, 1996, and its stock was listed on the NASDAQ Global Select Market under the symbol “YHOO.” 

Sale of the Operating Business to Verizon Communications Inc.

On July 23, 2016, the company entered into a Stock Purchase Agreement (the “Original Stock Purchase Agreement”) with Verizon Communications Inc. (“Verizon”), pursuant to which Altaba has agreed to sell, and Verizon has agreed to purchase (the “Sale Transaction”), all of the outstanding shares of Yahoo Holdings, Inc., a newly formed wholly-owned subsidiary of Yahoo (“Yahoo Holdings”) (and prior to the sale of Yahoo Holdings, to cause Yahoo Holdings to sell to a foreign subsidiary of Verizon all of the equity interests in a foreign subsidiary of Yahoo Holdings that will hold certain foreign subsidiaries relating to its operating business), which, immediately prior to the consummation of the Sale Transaction, will own its operating business. Under the Original Stock Purchase Agreement, the aggregate consideration to be paid to it by Verizon in connection with the Sale Transaction was $4,825,800,000 in cash, subject to certain adjustments as provided in the Original Stock Purchase Agreement.

Concurrently with the execution of the Original Stock Purchase Agreement, the company entered into a Reorganization Agreement (the “Original Reorganization Agreement”) with Yahoo Holdings, pursuant to which the company will transfer to Yahoo Holdings prior to the consummation of the Sale Transaction all of its assets and liabilities relating to its operating business, other than specified excluded assets and retained liabilities (the “Reorganization”).

On February 20, 2017, Yahoo and Verizon entered into an Amendment to the Stock Purchase Agreement amending the Original Stock Purchase Agreement (the “SPA Amendment” and, together with the Original Stock Purchase Agreement, the “Amended Stock Purchase Agreement”), and, concurrently with the execution of the SPA Amendment, Yahoo and Yahoo Holdings entered into an

Amendment to the Reorganization Agreement amending the Original Reorganization Agreement (the “RA Amendment”). Additionally, concurrently with the execution of the SPA Amendment and the RA Amendment, Yahoo, Yahoo Holdings, and Verizon entered into a Settlement and Release Agreement (the “Settlement and Release Agreement”).

The SPA Amendment, among other things,  reduced the consideration to be paid by Verizon to Yahoo in connection with the Sale Transaction by $350,000,000 to $4,475,800,000, (ii) provided that certain data security incidents to which Yahoo has been subject will be disregarded for purposes of determining whether certain closing conditions have been satisfied and in determining whether a “Business Material Adverse Effect” has occurred, and (iii) provided that the date after which each of Yahoo and Verizon may terminate the Amended Stock Purchase Agreement if the Closing (as defined in the Amended Stock Purchase Agreement) has not occurred has been extended to July 24, 2017.

The RA Amendment provides, among other things, that Yahoo and Verizon will each be responsible for 50 percent of certain post-closing cash liabilities related to certain data security incidents and other data breaches incurred by the Company.

Under the terms of the Settlement and Release Agreement, among other things, Verizon released certain claims, subject to certain exceptions, it (and its affiliates and representatives) may have against the Company (or its affiliates and representatives) relating to certain data security incidents and other data breaches incurred by the Company.

Upon completion of the Sale Transaction, Verizon will also receive for its benefit and that of its current and certain of its future affiliates, a non-exclusive, worldwide, perpetual, royalty-free license to certain intellectual property not core to the operating business held by Excalibur IP, LLC, a wholly-owned subsidiary of the Company (“Excalibur”), that is not being transferred to Yahoo Holdings with the operating business.

The excluded assets include its cash and marketable securities as of the closing of the Sale Transaction, its shares in Alibaba Group Holding Limited (“Alibaba Group”) and Yahoo Japan Corporation (“Yahoo Japan”), certain other minority equity investments, and all of the equity in Excalibur. The retained liabilities will include the 0.00% Convertible Senior Notes due 2018 (“Notes”) the company issued in November 2013, securityholder litigation, certain director and officer indemnification obligations, and, pursuant to the RA Amendment, 50 percent of certain post-closing cash liabilities related to certain data security incidents and other data breaches incurred by Yahoo. Following the closing of the Sale Transaction, the excluded assets and retained liabilities will remain in Yahoo which will be renamed Altaba Inc. and will become an independent, publicly traded, management investment company registered under the Investment Company Act of 1940.

The closing of the Sale Transaction is subject to certain conditions, including, among others, the approval of the Sale Transaction by its stockholders, the closing of the Reorganization, and certain other customary closing conditions.

The Amended Stock Purchase Agreement may be terminated by it or Verizon in certain circumstances. If the Amended Stock Purchase Agreement is terminated, the company may be required to pay Verizon a termination fee of $134,274,000 (which was reduced from $144,744,000 pursuant to the SPA Amendment) in certain circumstances, including if the company terminate the Amended Stock Purchase Agreement to enter into a superior proposal satisfying certain requirements.

Under the terms of the Amended Stock Purchase Agreement, each of its stock options outstanding immediately prior to the closing will, if not already vested, become fully vested as of the closing and will remain outstanding in accordance with its terms, and the company will retain all liabilities and obligations with respect to such outstanding stock options. Each restricted stock unit (an “RSU”) of the Company that is outstanding immediately prior to the closing generally will be replaced with a cash-settled Verizon RSU award, and will be subject to the same vesting and other terms and conditions as the Yahoo RSUs.

The company filed a definitive proxy statement soliciting stockholders’ approval of the Sale Transaction with the U.S. Securities and Exchange Commission on April 24, 2017. The special meeting of the Company’s stockholders at which they will vote whether to approve the Sale Transaction has been scheduled for June 8, 2017. The Sale Transaction is expected to close in June 2017.

User Offerings

Yahoo is focused on informing, connecting, and entertaining its users with its search (Yahoo Search), communications (including Yahoo Mail and Yahoo Messenger), and digital content products (including Tumblr, and its four core verticals: Yahoo News, Yahoo Sports, Yahoo Finance, and Yahoo Lifestyle).

The company's user offerings include:

Search

Yahoo Search serves as a guide for users to discover the information on the Internet that matters to them the most. In 2016, Yahoo continued to invest in platform enhancements; in acquiring new users through default search set and home page sets through its network and through partners; and in building out compelling search experiences for major events, such as the Summer Olympics and the 2016 U.S. Presidential election.

The company plan to continue investing in a differentiated mobile and desktop search experience by allocating additional resources to develop new search advertising technology through its Yahoo Gemini platform that provides personalized, commercial results for the user and anticipates the user’s needs.

Under its Search and Advertising Services and Sales Agreement (“Search Agreement”) with Microsoft Corporation (“Microsoft”), Microsoft provides algorithmic and paid search advertising services on a non-exclusive basis for Yahoo Properties on mobile, desktop, and Affiliate sites. This agreement is subject to a volume commitment by the Company to request paid search results from Microsoft for 51 percent of its search queries originating from desktop computers accessing Yahoo Properties and its Affiliate sites and to display only Microsoft’s paid search results on such search result pages. In October 2015, Yahoo entered into the Google Services Agreement (the “Services Agreement”) with Google Inc. (“Google”) that provides Yahoo with additional flexibility to choose among suppliers of search results and ads. Google’s offerings complement the search services provided by Microsoft and Yahoo Gemini (Yahoo’s platform for search and native advertising). See “Advertiser Products” and “Advertising Formats” below for further information about its Yahoo Gemini platform. Yahoo continues to develop and launch features around the results to enhance the search experience for its users.

Communications

Yahoo Mail is a primary driver of engagement across its user offerings. Yahoo Mail connects users to the people and content most important to them across mobile and desktop. The company support connecting external mail providers (such as Gmail, AOL, and Outlook) for users to manage multiple accounts from the Yahoo Mail client. Each Yahoo Mail account comes with one terabyte of free storage and is integrated with contacts, calendar, and messaging (see Yahoo Messenger section below). The Yahoo Mail mobile app includes user-centric features such as account key, compose assistant, document preview, and smart contacts.

Yahoo Messenger, its instant messaging service, provides an interactive and personalized way for users to connect, communicate, and share experiences in real-time. It incorporates many of its existing platforms including Tumblr and Xobni, with features like GIF search, “hearting” messages, and unsend. Yahoo Messenger is available as a mobile app, on the web, and also integrated directly into Yahoo Mail on desktop to drive deeper engagement with users.

Digital Content

The company's Digital Content offerings include: Tumblr, its global social platform, and its four core verticals: Yahoo News, Yahoo Sports, Yahoo Finance, and Yahoo Lifestyle. The company's Digital Content is available on mobile or desktop.

Yahoo News, which can be accessed through the Yahoo App and the Yahoo homepage at Yahoo.com, gives users access to discover, consume, and engage around the news, content, and video they care about all in one place. The company continue to provide current and trending news and information from Yahoo original editorial and partner content. Yahoo News is optimized to provide a consistent, easy-to-use content discovery experience across mobile and desktop with breaking news, local weather, a personalized content stream, and social sharing capabilities.

Yahoo Sports serves one of the largest audiences of sports enthusiasts in the world and delivers experiences for every fan, every day. Yahoo Sports provides users access to Fantasy Sports.

Yahoo Finance provides a comprehensive set of financial data, information, and tools that helps users make informed financial decisions. The robust content on Yahoo Finance is a mix of Yahoo original editorial and syndicated news via relationships with several third-party partners.

Yahoo Lifestyle brings together content, commerce, and community to engage users passionate about style, fashion, and entertainment. Yahoo’s Lifestyle features Yahoo’s original editorial voice to deliver authoritative and authentic style and beauty content. With Polyvore, users have access to discover and publish their own style trends, and to buy items featured in articles and sets through direct integration with commerce sites. And as part of Yahoo’s long-standing distribution partnership with Hulu, Yahoo View gives users access to watch episodes of their favorite TV shows across mobile and desktop, and go beyond the episode with clips, recaps, and content from Tumblr.

Tumblr offers a web platform and mobile applications on iOS and Android that allow users to create, share, and curate content. Tumblr messaging enables users to engage with other users that share their same interests and passions.

Advertiser Offerings

Yahoo has two core advertiser products: Gemini and BrightRoll, which includes the BrightRoll Demand Side Platform and BrightRoll Exchange. Advertisers benefit from its comprehensive approach to digital advertising across search and display advertising, which includes native, video, premium, and audience ads. Gemini and BrightRoll are supported by Yahoo’s technology platform, data, and analytical tools.

Advertiser Products

Yahoo Gemini is Yahoo’s proprietary marketplace for search and native advertising across devices. Yahoo Gemini helps marketers achieve measurable results with intent-driven advertising. By leveraging Yahoo’s proprietary data, Gemini helps advertisers target the audiences they are interested in reaching across Yahoo Properties and third-party publishers and engage those audiences through search and native ads. Gemini search is focused on helping advertisers reach their target audiences at the moment the user has made a relevant search query. Gemini native ads are built to match the content that a user is exploring. By using the surrounding content to establish relevancy for targeting, Gemini native ads drive higher audience engagement and brand awareness for the advertiser.

BrightRoll is Yahoo’s unified brand for programmatic advertising technology, offering a suite of media-agnostic tools to help advertisers, publishers, and partners connect with users across ad formats and devices. The BrightRoll Demand Side Platform (“BrightRoll DSP”) is technology that enables brand and performance advertisers to plan, execute, optimize, and measure programmatic digital advertising campaigns. The company's targeting solutions allow advertisers to reach users across Yahoo, exclusive publishing partners, and a wide variety of sites and mobile apps with the scale and efficiency of programmatic buying. BrightRoll DSP offers advertisers greater control and transparency with advanced programmatic buying capabilities and access to Yahoo’s proprietary data. Advertisers can reach the right people with custom audience definition and manage frequency on any device with independent campaign measurement and insights. The BrightRoll Exchange connects display, video, and native inventory from the top publishers and ad exchanges with demand from the top DSPs, agencies, ad networks, and advertisers. The BrightRoll Exchange delivers revenue to publishers with the goal of maximizing yield and offers buyers access to a variety of premium digital advertising inventory and unique data with the goal of enabling them to efficiently value supply.

Advertising Formats

Search Advertising.    Yahoo Gemini connects advertisers with the audiences across its network, with the support of strategic account teams, reporting, analytics, and extensive campaign controls. Yahoo continues to focus on developing new search ad formats, features, and capabilities to engage users and optimize performance across devices, including click-to-call functionality, sitelink extensions, location extensions, and product ads. To provide the richest possible experience for its users, Yahoo also serves search ads from partners, including Microsoft and Google.

Display Advertising.    Yahoo display ads leverage a comprehensive set of proprietary data signals to identify and engage the right users on Yahoo and across the web. With display ads, Yahoo can help brands make meaningful connections with the right users at the right time, across devices.

Native Advertising.    Yahoo native ads are a seamless part of a user’s experience on Yahoo sites across devices, as well as third-party partner publisher sites and mobile apps. This natural integration helps advertisers connect with people in a compelling and impactful way, driving awareness and performance, especially on mobile where native ads are the predominant ad format. Yahoo native ads are visually rich and come in a variety of formats, like text, image, and video that deliver measurable branding and sales results. Yahoo offers native ads through Yahoo Gemini and the BrightRoll DSP.

Video Advertising.    Yahoo video ads enable brands to align with premium, contextually relevant video programming across its properties and third party publisher partners. In addition, the company leverage Yahoo’s unique user data to connect brands to their target audiences at scale across devices.

Premium Advertising.    Yahoo premium ads offer a unique and engaging canvas for brand storytelling. The company offer high-impact advertising opportunities on Yahoo.com, Yahoo Mail, and program sponsorships of major events. Brands have the ability to anchor buys within premium content and scale programmatically, while applying unique data strategies to reach their target audience.

Audience Advertising.    Yahoo audience ads leverage a comprehensive set of proprietary data signals to identify and engage the right users on Yahoo and across the web. With audience ads, Yahoo can help brands make meaningful connections with the right users at the right time, across ad formats and devices.

Developer Offerings

The Yahoo Mobile Developer Suite gives developers the ability to measure, monetize, advertise, and improve their apps with Yahoo tools.

Flurry Analytics is a free mobile app analytics solution that is implemented in applications on more than 2 billion devices worldwide. Flurry is integrated in third-party applications via a lightweight software developer kit (“SDK”). Flurry provides mobile app developers insight into the actions their users are taking in-app, as well as their audience’s interests and demographics. Additionally, Flurry Pulse allows users to share data with partners and comScore for data validation.

Yahoo App Publishing (“YAP”) enables third-party app developers to monetize their app experiences with native and video advertising from Yahoo Gemini, Flurry, and BrightRoll advertisers. Developers can integrate YAP through the Flurry SDK.

Yahoo App Marketing gives third-party app developers the ability to advertise their apps through targeted native and video advertising on Yahoo, Tumblr, and across its app network. Yahoo App Marketing ads are powered by Yahoo Gemini and priced on a cost-per-click basis.

Tumblr In-App Sharing allows developers to integrate a Tumblr sharing button into their app experiences to enable their users to share content directly to Tumblr without leaving their app. When a user shares content from a developer’s app, it will be posted to the user’s Tumblr blog along with a deep-link back to the developer’s app. By clicking this deep-link, users will be directed to the developer’s app, and if the user does not have the developer’s app, they will see a prompt to install it.

Product Development

Yahoo continually launches, improves, and scales products and features to meet evolving user, advertiser, and publisher needs. Most of its software products and features are developed internally. In some instances, however, the company might purchase technology and license intellectual property rights if the opportunity is strategically aligned, operationally compatible, and economically advantageous. While it may be necessary in the future to seek or renew licenses relating to various aspects of its products, the company believe based on past experience and industry practice that such licenses generally could be obtained on commercially-reasonable terms. The company believe its continuing innovation and product development are not materially dependent upon any single license or other agreement with a third-party relating to the development of its products.

Yahoo’s product teams, which include a broad array of engineering and product talent, support a large portion of the Yahoo product portfolio and technology infrastructure. The company's product teams have expertise in web and mobile user applications, scalable software platforms, information retrieval, machine learning and science, editorial, networking/communications technologies, and presentation layer frameworks. The company take security and privacy very seriously, and continuously innovate to protect its users and their data.

The company's engineering and production teams are primarily located in its Sunnyvale, California headquarters. Product development expenses for 2014, 2015, and 2016 totaled approximately $1,156 million, $1,178 million, and $1,055 million, respectively, which included stock-based compensation expense of $139 million, $190 million, and $213 million, respectively.

Global Operations

The company manage its business geographically. The primary areas of measurement and decision-making are Americas, EMEA (Europe, Middle East, and Africa), and Asia Pacific.

The company own a majority or 100 percent of all of these international operations (except in Australia, New Zealand, and Japan where Altaba has joint ventures and/or noncontrolling interests). The company support these businesses through a network of offices worldwide.

Revenue is primarily attributed to individual countries according to the international online property that generated the revenue.